The demand function is Q=600-P with P being the price paid by consumer. I know the first P is $400 and Pnet is 160. There is 40% co insurance,. How do I figure out the quantity demanded? Our instructor said it was 440 but how do you get to that number?
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To figure out the quantity demanded, we need to substitute the given values into the demand function and solve for Q.
The demand function is: Q = 600 - P
Given that the first P is $400, we substitute P = $400 into the equation:
Q = 600 - $400
Q = 200
So, at a price of $400, the quantity demanded is 200 units.
Now, let's consider the concept of co-insurance. Co-insurance refers to the portion of the medical expenses that the insured person is responsible for paying after the deductible has been met. In this case, the co-insurance is 40%.
Since the Pnet value is given as $160, it represents the price paid by the consumer after the co-insurance is applied. To determine the original price before the co-insurance, we can set up the equation:
Pnet = (1 - Co-insurance%) * P
Substituting the given values:
$160 = (1 - 0.40) * P
Simplifying, we have:
$160 = 0.60P
Now, we can solve for P:
P = $160 / 0.60
P = $266.67 (rounded to two decimal places)
So, the original price paid by the consumer before the co-insurance is approximately $266.67.
Substituting this value into the demand function:
Q = 600 - $266.67
Q ≈ 333.33
Since demand is typically measured in whole numbers, we can round down to the nearest whole number. Therefore, the quantity demanded at a price of $266.67 is approximately 333 units.
Hence, the quantity demanded obtained by your instructor as 440 may be incorrect based on the given information and calculations provided.