HEALTH ECONOMICS (ECON 307) Trinity College - Hartford Problem Set #1 Chapter 1 List the three main reasons why health care spending has had an increasing trend since the 1960s in the United States

HEALTH ECONOMICS (ECON 307) Trinity College - Hartford Problem Set #1

Chapter 1

1. List the three main reasons why health care spending has had an increasing trend since the 1960s in the United States.
2. Suppose that a woman works 40 hours per week with no opportunity for overtime. She also takes care of a sick parent. Can we say that her time has no value in providing this health care because she could not earn more at work?

Chapter 2

3. Calculate the price elasticity for a $1 change in price at initial price level $300 for the demand function Qd=1,500 – 1.5P. Is the demand curve elastic or inelastic?

4. Assume that a monopoly firm has a linear demand curve and a constant marginal cost curve. Graph this firm’s optimal output choice before and after a per-unit excise tax is placed on the output. Does the equilibrium price rise by as much as the tax?

5. Using equation (2.4) in the book, what is the demand equation as a function of Ps if the price of other pastas (Po) is $2, the individual’s income (Y) in thousands is $25, and tastes (Z) are represented by 20?

6. Draw a consumer’s budget constraint when the consumer has an income of $100, Pgas=$2 and Ppizza=$10.
   • a)  Is “30 units of gas and 3 pizzas” a utility maximizing bundle?