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Equilibrium price for physiotherapy-Microeconomics

The equilibrium price for physiotherapy visits is $30 and the quantity utilized is 150 visits as a result of the demand and supply conditions in this diagram. The state legislature is concerned that the current price does not give the physiotherapists enough incentive to produce a high volume of services. A proposal has been made to increase the price paid by the consumers to the suppliers to $40. what will the resulting quantities demanded and supplied and the resulting utilization be?

Price $ supply
40 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- -
- -
- -
30 - - - - - - - - - - - - - - - - - - - - - - intersects here -
- - -
- - -
- - -
- - -
- - -
- - -
- - - Demand
10 - - -

50 100 150 200 250

Solution Preview

The new price of $40 causes the Quantity Demanded to go down to 100 visits, while the Quantity Supplied increases to 200 visits. As the price increases ...

Solution Summary

This is an explanation of how quantity demanded and quantity supplied change based on an increase in price, given the equilibrium price for physiotherapy visits and the supply and demand diagram.

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