A physical therapy clinic faces a demand equation

1. A physical therapy clinic faces a demand equation of Q=200-1.5P, where Q is the number of sessions booked per month and P is the price per session. The clinic currently charges $60 per session.  

a)What are its sales volume and total revenue per month at this price? 

b)What happens to volume and revenue if the price changes to $70 per session? 

c)Calculate the elasticity of demand. Is it inelastic, unit-elastic, or elastic?

2. Some argue that the price elasticity of demand can be used to determine whether a good or service is a luxury or a necessity.  In medical care, a procedure with an elastic demand would be considered optional, or elective, and procedure with an inelastic demand would be a medical necessity.  Should planners use price elasticity of demand as a guide to defining services that are medically necessary?  What are the advantages of such a classification scheme?  What are the drawbacks?

3. An individual expects that an upcoming surgery will cost $5,000.  Suppose this is the first medical expense of the year for that individual (they have not paid any part of their deductible so far). The individual has an insurance plan with a $1,000 deductible followed by a 20% coinsurance for any additional medical expenses during the year.  What are the expected out-of-pocket expenses for this surgery?

4. Fill in the missing numbers for the following table.  Make sure you are able to show your work or explain your answers. (Note: I've posted two additional videos in the Module 5 lesson content that should help with solving this problem).