Question
A couple of assignment questions:
Assume that the market for annual physical check-ups is in equilibrium, and not everyone gets an annual physical check-up.
What is the effect on price and quantity if a government regulation fixes prices at the current level and requires everyone to get an annual physical check-up?
and...
Explain why a tax increase on cigarettes in one state alone might not lead to a substantial price increase for all customers in that state.
Assume that the market for annual physical check-ups is in equilibrium, and not everyone gets an annual physical check-up.
What is the effect on price and quantity if a government regulation fixes prices at the current level and requires everyone to get an annual physical check-up?
and...
Explain why a tax increase on cigarettes in one state alone might not lead to a substantial price increase for all customers in that state.
Answers
economyst
1) Draw supply and demand graphs for physicals. If government mandates (and enforces) a law for everyone to have a physical, then the demand for physicals becomes highly inelastic (nearly vertical) at Qn where Qn=population. Without a price fix, what happens to price and quantity? Now then set, a price freeze at the initial price. How much are suppliers willing to provide at that price?
2) Do people in NY buy cigs in NJ?
2) Do people in NY buy cigs in NJ?