Answer to Question #279131 in Economics for Navodita Sharma

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 curve to illustrate how each of the following events would effect the price/ or premium in quantity of a private health insurance policy (a) if you get benefits under swathya bema yojna of the state government? (b) a decrease in your average income level during pendamic (c) if policy premium are expected to increse in coming future and (d) if more tax benefit are provided for taking this policy?

Answer 1

Measuring price, income, cross and advertisement elasticities of demand for an insurance product is good for the growth of the sector, because it gives understanding what to do to increase total revenue and profit.

(a) if you get benefits under swathya bema yojna of the state government, then the demand for insurance will increase, and as a result price and quantity will increase.

(b) A decrease in your average income level during pandemic will decrease the demand for insurance, and as a result price and quantity will decrease too.

(c) if policy premium are expected to increse in coming future and (d) if more tax benefit are provided for taking this policy, then the supply of insurance will increase, as a result price will decrease, and quantity will increase.