Demanded after the new copayment is put into effect

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Currently, there is a $0.50 copayment on drugs. The HMO has decided to raise this to $1.00 per prescription. The cost of a prescription is $6.00, which mean the HMO's contribution to the total cost will fall from $5.50 to $5.00. Currently, the elasticity of demand is about -0.5 for prescriptions, and the HMO members use 2.2 prescriptions per capita. How much will be demanded after the new copayment is put into effect, and how much money will this save the HMO? Explain.

Reference no: EM13859971

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