question 1

Vaccinations against a communicable disease are provided by a competitive industry. Demand is given by Qd = 100 - 2P and supply by Q5 = 20 + 2P a) Sketch the supply and demand schedules on a graph. Find the equilibrium price and quantity assuming no health insurance is available. (4 Marks) b) Now suppose that vaccinations are covered by a health insurance policy. The policy provides 20% coinsurance rate. Find the equilibrium price and quantity in the presence of this insurance program. Label the new equilibrium quantity Q2 (4 Marks) 0) Sketch and calculate the deadweight loss induced by the insurance program, assuming the market outcome in the absence of insurance is efficient. (4 Marks) d) Suppose the coinsurance rate was raised to 50%. Calculate the new equilibrium price and quantity. (4 Marks) e) Calculate the new deadweight loss. How does your answer compare to the deadweight loss in part (c). (4 Marks)