Consider how health insurance affects the
quantity of healthcare services performed.
Suppose that the typical medical procedure
has a cost of $100, yet a person with health
insurance pays only $20 out of pocket. Her
insurance company pays the remaining $80.
(The insurance company recoups the $80
through premiums, but the premium a person
pays does not depend on how many procedures
that person chooses to undertake.)
a. Draw the demand curve in the market
for medical care. (In your diagram, the
surplus change? Show these changes in your
graph.