demand curves and coinsurance
1. Consider the following information on Barneyâ€™s demand for visits per year to his health clinic, which is based upon the fact that his insurance does not cover clinical visits (that is, 100% coinsurance rate):
a. Barney has been paying $44 per visit (V). How many visits does he â€œconsumeâ€ per year? Draw his demand curve.
b. Suppose now that his insurance company institutes a 50% coinsurance feature (that is, Barney pays 50% of the price of each visit). Show what happens to the demand curve. What is Barneyâ€™s new equilibrium quantity?
c. Is price elasticity of demand higher, lower or the same as before now that Barney has a 50% coinsurance feature? Explain. (No calculations are needed to answer this question, so donâ€™t calculate elasticity.)