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Question: question 2 donald is uninsured and is just moving to...

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Question 2 Donald is uninsured and is just moving to Washington DC. He currently knows that in order to keep his mental health in good shape, he needs to visit a therapist on a regular basis. The therapist charges P dollars per visit and this must be paid upfront upon arrival to her office. We will denote the number of visits he demands by X (as seen in class). Don also loves McDonalds hamburgers (and junk food in general) and whenever he has a chance to eat them, he would do it. We willdenote by Y the rumber of hamburgers he eats and we will denote by Py the price per hamburger in DC. Finally, he also hos to live somewhere, so he has to rent a house in DC. The rental price per square foot in DCis on average Pz dollars per square foot and Z is the number of square feet that he decided to rent. Suppose that his preferences over bundles of health care, food and housing are captured by the following utility function U(x,Y,Z) XYZ Therefore, MUx YZ MUy-XZ and MUz-XY a) Write down Donalds utility maximization problem subject to his budget constraint. b) What are the conditions that must be satisfied for Don to be maximizing his utility? c) Derive Dons demand for therapist visits as a function of the prices he faces and his income. d) Derive the demand for hamburgers as a function of the prices he faces and his income. e) Derive the demand for housing as a function of the prices he faces and his income. ) Suppose now that Donald gets insurance and that he has paid his deductible already and now he faces a 20 percent coinsurance rate. What is the new demand curve for health care (therapy sessions) of Don?
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