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Weekly Notes 2

by: Mike Meng

Weekly Notes 2 ECON 142

Marketplace > Kansas > ECON 142 > Weekly Notes 2
Mike Meng
GPA 3.46
Micro Economics
Dr. Brian Staihr

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here is the notes for last week
Micro Economics
Dr. Brian Staihr
Class Notes
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This 7 page Class Notes was uploaded by Mike Meng on Saturday February 28, 2015. The Class Notes belongs to ECON 142 at Kansas taught by Dr. Brian Staihr in Spring2015. Since its upload, it has received 100 views.


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Date Created: 02/28/15
02282015 Exam 2 next Monday Chapter 56 using elasticity 7 Chapter The Economics of Healthcare In the US Most people don39t pay for healthcare but insurance and their nsurance company pays for the health care Some people get insurance through their work 64 Some people get insurance through government 36 Through the market 10 Without insurance 16 lllllllllll Going without health care vs going without insurance In the US no one goes without health care people can always go to emergency room But emergency room only treat acute cases not required to treat chronic cases and it s not free D D Single payer system insurance from the government D In Canada people don t pay premium but pay taxes to the government The hospital is paid by the government but doctors are not a government s employees People get health insurance form the government D D Socialize Medicine health care from the government D In UK people don t pay premium but pay taxes to the government The hospital is government s hospital and doctors are government s employees lllllllllll Third party payer system P215 In the US people pay for insurance then the insurances pay for octor s service Party consuming the product is not the party bene ts D D D d D D D The principalAgent Problem B One party is acting on behalf of another party D Example Professor acting on behalf of the school management acting on behalf of firm s shareholders B One party is able to disobey what s required for them to do by their customers D D D D l0 D D D D D Economic information P213 Asymmetric lnformationincomplete information When one party to a transaction has less information than the other arty Example car dealers used cars The market for lemonslow quality used cars P213 George Akerlof Because the seller always has more information than the buyer the market can quotbreak downquot D The incomplete information causes the market for high quality used cars breaks down because the amount of money people are willing to pay for a used care is less than the market price of good used cars So every car dealers sell lemons instead D E Market function badly when information is incomplete market is more efficient when information is more complete D D Adverse Selection P213 B When a party to a transaction takes advantage of other party s lack of information D The hidden information U Bad customers or bad producers are more likely to be selected due to asymmetric information B When sellers have more information and can take advantage like taxi drivers D Hidden information for the insurance provider bad customers take advantage of the asymmetric information The insurance company don t know what bad habits their customers have Customers have bad or dangerous habits are more likely to buy insurance D Risk Pooling P214 Way to reduce adverse selection in insurance States require driver to have insurances 2010 s healthcare reform requires all people to purchase insurance risk pooling ensures that insured population represents the overall population Not only bad customers purchase insurance Then insurance company has overall less chance to pay for the accidence of their customers D risk pooling ensures insurance companies are able to make pro ts D D Moral Hazard P214 D Actions one party takes after entering into transaction that take advantage of other party s lack of information D Customer change their behavior after being insured Customs become more careless after being insured D People go to the doctor more often after buying health insurance D Driving more reckless after buying insurance D llllll lllllll Coinsurance Copays customers pay some and insurance pay some Deductible customers pay for the rst certain P217 Many aspects of health care involves externality If healthcare is left to the market the quantity if healthcare produced and demanded is too low Then the positive externality is too low No one will get a u shot and no others will not bene t form it D llllllllllllllllll should the government be involved Yes Public goods nonrival and nonexcludable P219 A u shot Rival and excludable So it doesn t qualify as a public good Healthcare is not public good But it s has some positive externality to the society So it s somewhere in between public and private goods 36 od people get insurance form the government 51 of the tax spend on the 36 of them When the cost of healthcare increases the tax revenue are used to cover healthcare is going up then other spending will decrease or tax will increase D D D What s making the costs of healthcare rise Not paper work not malpractice insurance unnecessary tests higher cost in emergency room They play some role but no the key drivers Reasons 1cost disease low productivity in service industries cause higher costs The more eople take care of the patient the lower the productivity is 2the population is aging health care spending on people over age 65 is 6 times greater then oung people with age between 18 to 24 3distorted economic incentives moral hazard P223 when people are insured they tend to go to the doctor more It is not socialized medicine It is not a singlepayer system It is a set of adjustments to our current third party payer system ACA of 2010 Individual Mandate Requires all individual to have insurance OR pay a ne The idea is risk pooling low income people will be offered tax credits to offset the cost of buying insurance they don39t have to buy insurance D young people are able to stay with their parents until the age of 26 l0 D D y D D D D Affordable Care Act Obama care P226229 D D D D D D D D D D cheap insurance until 30 Preexisting conditions stops insurance companies form denying or charging more on coverage to people because of preexisting condition D if patient start to buy insurance when they nd out they are diagnosed with some disease the amount of premium the patient pays is way less than the amount money the insurance company pays for the treatment Than the insurance companies are more likely to go out business D D D D D D Employer mandate D Require all rms have more than 200 people to offer insurance 0 employee D Firms with less than 50 employees are unaffected D D Create quotstate health exchangesquot D idea is bring together the buyers and sellers of insurance D Insurance company will compete for customers D U More people quali ed for Medicaid D Medicaid is governmentprovided insurance for lowerincome ersons People with incomes gt 2000000 will see some tax increase The idea is to have more people insured and reduce the cost of l0 D D D Lifetime maximum payout are prohibited D D healthcare READ P159 Healthcare is not market based because there is no price for certain herapy Chapter 7 Consumer behavior what we demand why we demand Utility The happiness satisfaction contentment from consuming Assumption people consume in such a way as to maximize their utility subject to how much they can afford lllllllllllf 39llllll Marginal Utility The addition utility you get from consuming 1 more unit of a thing the same thing The graph of marginal utility only go down D D D D D D Diminishing Marginal Utility P202 D The second beer is always not as good as the rst one D D D D D D D D Total utility P202 Going up to a peak and start to go down


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