1. A. Draw a demand and supply curve for physician services and label the market equilibrium price and quantity.

B. Suppose for some reason there is an increase in the quality of physician services (due, say, to technological advances). Show the increase in demand on the diagram you drew above and identify the new market equilibrium price and quantity. Explain what happens to the quantity demanded and quantity supplied compared to the original market equilibrium price and quantity identified in part B.

C. What happens to the market equilibrium price and quantity exchanged if there is a reduction in supply (leftward shift in the market supply curve). Explain your answer.

2. A. Draw a demand and supply curve for a physician's office visits where there is no insurance coverage. Indicate the equilibrium price and quantity of office visits in the market.

B. On your diagram above, draw in the market demand curve where there is a 50% coninsurance rate (assume everyone has insurance now)? What happens to the equilibrium price (paid by the insurer and received by the physician) and quantity of office visits? What happens to the net price paid by the consumer? Explain.

3. A. Suppose there was no insurance for prescription drugs. Draw a demand and supply curve for the market for prescription drugs. Explain what would happen to prices and quantity transacted if the government decided that the market price was too high and imposed an effectiveprice ceiling on prescription drugs below the market price. Draw this in your diagram and explain your answer.

b. What would happen over time if these price controls remain in place? Explain.