Suppose that the demand for medical services can be characterized by the equation P = 100 - Q. Suppose further that the supply of health services can be characterized by the equation P = Q + 50.
(a) What is the equilibrium quantity and price in the market for health services?
(b) In an effort to make health services more affordable, the government restricts the price of
health services to be no greater than $65. What will happen to the quantity of health services
in the market?
(a) Set 50 + Q = 100 - Q to get that Q* = 25 and P* = $75.
(b) At a price of $65, a shortage of health services will occur. Q* will now be only 15.
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