Suppose that the Live-Long-and-Prosper Health Insurance Company charges $5,000 annually for a family insurance policy. The companys president suggests that the company raise the annual price to $6,000 to increase its profits. If the firm followed this suggestion, what economic problem might arise? Would the firms pool of customers tend to become more or less healthy on average? Would the companys profits necessarily increase?
MAN 337: Class 2 Economics has a model of what makes our economy go o Model of economics: Market Economy (Modern Capitalism) o how can jobs be created and economy sustained o economy = a+hx + b +B + d +D b = interest rates B = flow of money d = banking D = job creating o Theories: Schumpeter or Keynes equilibrium theory asks the question how do you keep the econ in constant equilibrium (very good) = jobs + income + stability Keynes I am going to maintain the equilibrium theory Real econ v
