Question
Suppose that you have data at the individual level that includes information on the price of a doctor visit an individual and the number of
Suppose that you have data at the individual level that includes information on the price of a doctor visit an individual and the number of doctor visits they go to in a given year. For simplicity, let's say that those with more generous plans pay less for a doctors visit, while those with less generous plans pay more for a visit. How can someone graph the relationship between the price individual pays for doctor visits against the number of visits and how can there be seen a downward sloping line that can be called a measured demand. The problem of endogeneity discussed could arise here if individuals who know they go to the doctor frequently buy more generous coverage while those who know they rarely go to the doctor purchase less generous coverage. This would imply that the true demand curve if we were to account for endogeneity is either: more inelastic than the measured demand curve, less inelastic than the measured demand curve, or the same as? Explain.
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