Budgets and rising medical costs
Not what you're looking for?
Over the past decade medical costs have increased more rapidly than other prices. In order to illustrate how rising medical costs have affected consumer alternatives, let X represent the quantity of medical services, and let Y represent the quantity of other goods. Furthermore, let income (M) be measured in hundreds of dollars, the price of medical services and other goods in terms of dollars per minute, with M=100, Px=4, and Py=5.
a)Graph the budget line, and determine the market rate of substitution.
b)Explain and illustrate the budget set.
c)Show in your graph what happens to the budget constraint if increases to $10.
d)What is the meaning of the slope of the two budget constraints?
(NOTE: Label all graphs)
Purchase this Solution
Solution Summary
Budget constraints with respect to health care spending
Solution Preview
See the attached file. When the price of X is 4, the most the person can buy is 25 units (4 x 25 = 100). When the price of Y is 5, the most that can be purchased is 20 units. These are the intercepts for the Y and X axes. The budget line connects these points, indicating different possible combination that can be purchased with the $100 budget. The market ...
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.