The producer will bear more of the burden of the tax because supply is more elastic than demand.
C. After January 1, 2014 a portion of the Affordable Care Act (a.k.a. “Obamacare”) goes into effect that offers a publicly subsidized health insurance plan to low income individuals who do not have access to private health insurance or who do not have at least 60% of their healthcare plan covered through their private insurance. Suppose for simplicity that consumers who have access to this plan receive an effective $50 subsidy for each doctor’s visit. Given that the supply and demand equations from part (a) remain the same, now how many patients are seen per day? After the subsidy, what price do patients pay per doctor’s visit? What is the after-subsidy price received by doctors for these types of patient visits? In red, indicate these new numbers on the graph from part (a). Do not create a new graph.
Hint: Use the Wedge Method we practiced in class. Like in class, solve first in terms of “T” or “S” before finding the actual prices and quantities in relation to a specific tax or subsidy. You will receive points for some of the steps in the solution process.
D. Calculate and show graphically the cost of the subsidized doctor visits program in Bozone, MT. Hint: This question is asking about the dollar amount spent by the government to provide the described program in Bozone, MT. Highlight the area representing your calculation on your graph in part (a). (4 points)
D. One of President Obama’s goals for a national healthcare plan is to expand coverage to those who do not currently have access to comprehensive healthcare benefits. According to your findings from part (c), did the Affordable Care Act expand healthcare coverage in this target market? Support your answer with the calculations you made throughout the question.