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Health Economics Assignment 4
Health Economics Assignment 4
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Economics 2
Problem 11.8
- Both Steve and also Ralph are employed at the same place and get a wage of
$15/hour
- The marginal rate differs due to the fact that Ralph is married so he is taxed at 28%
- Based on those info,Ralph is believed to have a higher demand when it comes to the
health insurance.
In the graphic provided, on the x side is depicted the insurance while on they one is
depicted the total wage. As can be seen,in the given circumstances, there will be a rotation in
terms of the constraints of the budget. Initially, it was represented by the MN line and had an
Economics 3
equilibrium point at the level of A. Even so, after the changes, the budget will rotate and will
now be represented by the line M'N'. This rotation will also modify the equilibrium which will
shift from E0 to E1 while the new equilibrium point is depicted in the graphic with the letter A'.
All of this point out that Ralph is expected to experience an increase in terms of the insurance
need.
Problem 11.9
The Profit = 0$
b) Wage Rate (taking into consideration the heath insurance ) =$8 +1$
Wage Rate = $9
Economics 4
Based on that
The Elasticity of the Labor Demand = ( The change in the workers/ Avg workers) /
c) We will calculate the values after the insurance and obtain the following
The profit = - $6
The calculation above points out that there is actually a loss of 6$. Even so, based on the
data provided in the problem, 10$ > 9$ which means that the price has a higher value
when compared to variable cost and because of that the production will continue on the
short run.
Economics 5
d) All the calculations above point out that Charlie is not winning enough in the short run.
Actually, he is losing and because of that, if changes do not occur, he will most likely
have to exit the market in the long run in order to be able to save money.
Problem 22.6
a) The two insurance plans are depicted below. The purple line depicts Plan B while the
blue line Plan A. We Know that
b) In the situation in which the money which is not used will be lost, it is believed that the
household which was classified as being unhealthy will be able to enroll in the health
savings account due to the fact that they believe that they will be able to spend the entire
money for health services. On the other hand, the healthy household most likely won't
enroll due to the fact that they won't need those services as much as the unhealthy
c) Yes, this circumstance will definitely change the enrollment decision. In the updated
version, enrolling for the insurance won't actually mean that the household will lose
money in the situation in which the health plans are not needed. Due to that, the healthy
household will also enroll for the plan due to the fact that they will consider it an efficient
backup plan which won't lead to loss of money even if they won't need those services.
Problem 22.7
The following represents the graphic based on which this problem will be answered:
When referring to the health sector, cost-sharing represents actually a share of the benefits of
cost which is supported both by the person involved and also the insurer when discussing the
loan for the expenses of health services. Due to this share, the patient will be directly involved in
the payment process which will mean a less burden on the insurer but a more significant one on
the patient.
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The graphic attached points out that when the burden is more significant on the patient due to
the fact that they need to pay a part of those services, the demand for the medical services will
tend to fall ( in the graphic provided it falls from point E to point F). On the other hand, the
supply rises from point S1 to point S2 while the equilibrium point will switch from point F to
point G.
Due to a large number of available supplies, the price for these services will also be reduced. As
it is depicted in the graphic the new quantity is represented by Q2 while the new price is P2
which is a lot lower than the initial price which was provided before the presence of cost-sharing.