1.9 Suppose that the market demand for medical care is summarized by the demand function:

Qd = 100 − 2p and the market supply is summarized by the supply function:

Qs = 20 + 2p a Calculate the equilibrium quantity and price, assuming no health insurance is available.

b Suppose that health insurance is made available that provides for a 20% coinsurance rate.

Calculate the new equilibrium price and quantity. (Hint: How does the demand curve shift?)

c Calculate the deadweight loss due to this insurance.