1) Suppose that you are selling Vitamins

Subject:EconomicsPrice: Bought3

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1) Suppose that you are selling Vitamins. You are currently selling vitamins for $3.50 apiece and you sell 25 boxes of vitamins per day. You know that the elasticity of demand for vitamins at your current price is -.6. Is your price too high or too low? Explain. If the income elasticity of demand is estimated at 0.613, do people consider vitamins a normal or inferior good, a necessity or luxury?

(5 points)

 

2. Every economy, as well as the medical care sector, must decide the following: what should be produced, how it should be produced, how it should be distributed, and how to allow for growth and innovation.

With respect to the medical care sector, how are these choices currently made? How have they changed over time? What are the assumptions and value judgments underlying each of these choices?

Compare the US system to the UAE system. (5 points)

 

3. Assume that the price of registered nurses was subsidized (Hospitals pay a lower wage to registered nurses). Trace the effect of such a policy in all the medical markets, and evaluate this policy in terms of its effect on the goal of increasing the level of the population’s health (Consider in your answers the effect on the demand curve for registered nurses, effect on the demand for substitutes ofregistered nurses, effect on hospital demand and the demand for nursing education..).

Second, evaluate this policy in terms of economic efficiency. Is it more efficient to subsidize registered nurses only or the hospital in general?

Finally, evaluate this policy in terms of who benefits and who bears the cost?(5points)

 

4) How can a model of demand for hospital care be used to explain changes in hospital utilization over time? (In answering this question use the determinants of demand for hospital care changes and the effect of elasticity on hospital utilization). (5 points)