The supply function for the product in exercise 10.7 is 160 + (0.9 × P). P is the price received by the seller. At the equilibrium price, the quantity demanded will equal the quantity supplied.

a. What was the equilibrium price before coverage? After?

b. After coverage begins, how much will the product cost insurers? How much will the product cost patients? How much did patients pay for the product before coverage started?

Exercise 10.7

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 D_U of the table.)

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

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P $1,000 $960 $920 $880 560 $840 $800 $760 $720 $680 D₁₁ U $640 $600 $560 Pu Net $176 D₁ 912 S 952