The demand function is Q = 1,000 (0.5 P). P is the price paid by

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The demand function is Q = 1,000 − (0.5 × P). P is the price paid by consumers. Calculate the quantity demanded when there is no insurance. (Put these values in column DU of the table.)P $1,000 $960 $920 $880 560 $840 $800 $760 $720 $680 D U $640 $600 $560 Pu Net $176 D 912 S 952

The state mandates coverage with 20 percent coinsurance, meaning that the demand function becomes 1,000 − (0.5 × 0.2 × P).

a. For each price, calculate the amount consumers pay. (Put this figure in column PNet.)

b. Calculate the quantity demanded when there is insurance. (Put this figure in column DI.)

c. Plot the two demand curves, putting P (not PNet) on the vertical axis.

d. How do DU and DI differ? Which is more elastic?

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