|Perfect Number of Pages to Order||5-10 Pages|
Model for Demand for Insurance Case Study
How can a person benefit from having health insurance coverage if the premiums paid exceed the cost of the medical care received? How can an insurance company benefit if the medical care it provides costs more than the premiums paid in?
4.2 Explain the terms “welfare gain of health insurance” and “welfare loss of health insurance” in your own words. What is meant by the statement that people are over insured?
4.3 What is the “price” of health insurance?
4.4 Explain why diminishing marginal utility of wealth is a prerequisite for the existence of a health insurance market.
4.5 Explain the term “adverse selection” in your own words. Adverse selection does not only pertain to health insurance. Explain how adverse selection may operate in markets for homeowners’ insurance and in automobile liability insurance. Explain how adverse selection might work in the market for used cars.
4.6 What is meant by the statement that “income elasticity of demand for private health insurance is positive”? List at least three potential channels underlying the observation that personal income is positively associated with the prob-ability that an individual has health insurance coverage. What do you expect would occur if the US government were to completely remove the tax subsidy on health insurance? Explain your answer.
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