00:01
Here we're looking at the market for medical services and we have a supply and demand graph here.
00:05
We'd like to find what a couple different points on this graph mean.
00:09
You can see that d1 is the demand curve if consumers pay the full price of their medical services.
00:16
D2 is the demand if consumers only have to pay a fraction of their medical services.
00:20
So in a case where say employers covered a part of it or government assistance covered a part of it.
00:24
And then we have our supply, which is the supply of medical services.
00:28
Let's first start with part a where we're asked to find a.
00:30
The equilibrium market price.
00:32
And at the equilibrium market price is that point where the supply curve intersects the demand curve where consumers only pay a fraction.
00:40
So that's going to exist right here.
00:43
So at that price it looks like it's p2.
00:48
Now the efficient quantity is going to occur where the demand curve of consumers paying the full price intersects the supply curve.
01:00
And this occurs because when consumers don't have to pay the full price, so like at d2, they're going to demand more than they really need.
01:08
Versus when consumers have to pay that full price, they'll be more careful, and they're only going to demand medical services when they really need it.
01:15
So we see that the efficient quantity occurs at q1...