Answer to Question #278469 in Macroeconomics for lokesh

Question

Why measuring price, income, cross and advertisement elasticities of demand for an

insurance product is good for the growth of the sector? Use supply and demand curves to

illustrate how each of the following events would affect the price/ or premium and quantity of

a private health insurance policy a) if you get benefits under swasthya bema yojna of the state

government b) a decrease in your average income level during pandemic c) if policy

premiums are expected to increase in coming future and d) if more tax benefits are provided

for taking this policy.

Answer 1

For making production profitable, it is essential that the quantity of goods and services should be produced corresponding to the demand for that product. Since the changes in demand is due to the change in price, the knowledge of elasticity of demand is necessary for determining the level of output