Econ 564 Sumanta “Ronnie” Mukher
jee
Healthcare Economics
PRACTICE PROBLEMS 1
Chapters: 4 and 5
This practice problem set is not graded. You do not have to turn it in. These are questions I have
asked in previous exams. I encourage you to work through the problems and discuss the answers
with me if you have any questions.
Please realize that these questions DO NOT comprise the exhaustive set of all questions that can be
asked from these chapters. The sections of Chapters 4 and 5 on which example questions are not
provided here are in no way less important. These are intended to give you an idea of what kind of
questions to expect in the exam.
1. Using budget constraints and indifference curves, illustrate and explain the effect of illness on the
use of medical care.
2. How can an increase in income affect the use of medical care in theory? Use a simple diagram to
illustrate your answer. Do the data support the theory? Describe in brief the statistical evidence in
this regard.
3. For a specific consumer and a specific illness, draw the demand curve for medical care without
insurance. How will the demand curve for medical care change when the consumer purchases an
insurance policy that pays 50 percent of the medical bills? In particular, if the slope of the demand
curve without insurance is -2, then what will be the slope of the demand curve with the insurance?
Be sure to draw a diagram and explain your answer.
4. Attempt Problem 8 on page 133 of the textbook.
5. Explain in detail the different plans proposed in the Rand HIS. How is the study useful in
understanding the empirics of medical care demand? Explain with an example.
6. The data in Table 5.5 (page 145) reveal that the use of dental care changed sharply over the
experimental years. Discuss this change in dental care use and provide an intuitive explanation for
this phenomenon. Why did the use of other types of medical care not show a similar pattern?
