Question
Suppose there are two medical interventions, A and B. Intervention A has more elastic demand than intervention B. The mean rates of each intervention are
Suppose there are two medical interventions, A and B. Intervention A has more elastic demand than intervention B. The mean rates of each intervention are identical.
a)You are studying practice variations for the two interventions. Suppose the coefficients of variation are the same for the two interventions.Which intervention experiences the larger deadweight loss from practice variation? Why?
b)You are studying the deadweight loss from insurance moral hazard for the two interventions. For the same insurance plan, which intervention experiences the larger deadweight loss from insurance moral hazard? Why?
c)Please give an example of a medical intervention (i.e., treatment) with high price elasticity of demand (i.e., elastic demand), and an example with low price elasticity of demand (i.e., inelastic demand).
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