(18 points) 7. A consumer's demand for a medical service is Q = 100 Pp where...

 

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(18 points) 7. A consumer's demand for a medical service is Q = 100 Pp where Pp is the out-of-pocket price she actually faces. She is consisidering four different insurance options: uninsurance, full insurance, a 50% coinsurance plan, and a copayment plan with a $25 copay. (6 points) a. Assume this service has a list price of PL = $70. Calculate Q under each insurance plan. (6 points) b. Calculate the amount of social loss under each insurance plan. (3 points) c. Derive a general expression for social loss as a function of x and PL, where x is the copay amount under a copayment plan. For simplicity's sake, assume x < PL. (3 points) d. Derive a general expression for social loss as a function of y and PL, where y is the coinsurance rate. (18 points) 7. A consumer's demand for a medical service is Q = 100 Pp where Pp is the out-of-pocket price she actually faces. She is consisidering four different insurance options: uninsurance, full insurance, a 50% coinsurance plan, and a copayment plan with a $25 copay. (6 points) a. Assume this service has a list price of PL = $70. Calculate Q under each insurance plan. (6 points) b. Calculate the amount of social loss under each insurance plan. (3 points) c. Derive a general expression for social loss as a function of x and PL, where x is the copay amount under a copayment plan. For simplicity's sake, assume x < PL. (3 points) d. Derive a general expression for social loss as a function of y and PL, where y is the coinsurance rate.