Answer to Question #237197 in Macroeconomics for bepo

Question

Draw the appropriate curve in each of the following cases. Is it like or unlike the curves you have seen so far? Explain.

Answer 1

Question: Draw the appropriate curve in each of the following cases. Is it like or unlike the curves you have seen so far? Explain. a. The demand for cardiac bypass surgery, given that the government pays the full cost for any patient b. Τhe demand for elective cosmetic plastic surgery, given that the patient pays the full cost c. The supply of reproductions of Rembrandt paintings

Answer to Question:

a. Since the government pays the full cost of cardiac bypass surgery, the price paid by the patient is always zero. Consequently, the demand for surgery is constant, regardless of the price actually paid by the government. The quantity demanded is constant at the quantity that would be demanded by patients if the government, not the patient, pays for surgery. That is, it is a vertical line at the quantity that patients would demand if the price of surgery to them was zero.

b. In this case the patient must pay the cost of the surgery; so the quantity demanded is affected by price, and the demand curve has its usual downward-sloping shape.

c. The supply of Rembrandt reproductions is not fixed because they can be created by existing artists. So the supply curve of these reproductions has the familiar upward-sloping shape.