Reference no: EM131411226

Answer the following five questions.

Q1. Demand curve of medical care for a typical individual is given by the equation: M=10 -0.1 P + 0.002 Y + 0.12 A, where M is the quantity of medical care demanded, P is the price of medical care, Y is income and A is the age of individual. The geographic area has 120 individuals and their average income is $5,000 and average age is 40 years. Using the average values of income and age,

(i) Derive the demand curve for the "typical" individual;

(ii) Draw the demand curve of typical individual;

(iii) Derive the market demand curve for the geographic area.

Q2. Using diagrams show the effect of following variables on the market supply curve of physician services. Assume that all physicians are identical. (i) number of physicians retiring is higher than the number of new physicians entering the market; (ii) in physician practice, nurses' time is an important input and due to increase in the years of education of nurses, wage of nurses has gone up; (iii) government has decided to subsidize physician services by providing a fixed amount of incentive money per unit of physician services supplied, (iv) income of the population in the area increased by 10%.

Q3. Obtain data for National Health Expenditure (NHE) per capita for the years 2000 to 2014. Using GDP deflator and Medical Care Price Index (MCPI), derive real NHE per capita for the years 2000 to 2014 in terms of 2014 prices (show all data and real NHE values in a table, can be copied from Excel file). Show the real NHE per capita values in one graph and describe how the real NHE per capita values differ due to the use of these two price indices.

Q4. Briefly describe a method of deriving physician needs in a country for the current year and for a year in the future, say 2025. Describe specific steps including the method of defining the current need, supply and need projections to derive physician shortages or surpluses in 2025. List the various parameters needed to calculate the gap between need and supply of physicians for the year 2025.

Q5. The marginal benefit functions (MB) at different levels of expenditures (E) for project A and B are given below. EA represents millions of dollars spent on project A and EB represents millions of dollars spent on project B. An organization is trying to determine how to allocate $45 million budget between these two projects in order to maximize total social benefits. Determine the level of expenditures on project A and project B to maximize social benefits, given the budget. Show your work.

MB_A = 140 - 2E_A, MB_B = 200 - 4E_B