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Currently, there is a $0.50 copayment on drugs. The HMO has decided to raise this to $1.00 per prescription. The cost of a prescription is $6.00, which means the HMO's contribution to the total cost will fall from $5.50 to $5.00. Currently, the arc elasticity of demand is about -0.5 for prescriptions, and the HMO members use 2.2 prescriptions per capitA) How much will be de?manded after the new copayment is put into effect, and how much money will this save the HMO?
Periodic Repayments
Regular payments made over time to settle a debt or loan, often consisting of both principal and interest components.
Profits
The financial gain obtained when the revenue from business activities exceeds the expenses, taxes, and costs of operation.
Insolvent
A financial state in which an individual or entity cannot meet its debt obligations as they come due, or its liabilities exceed its assets.
Debt Payment
The act of paying back the principal and interest on borrowed money, typically according to a predetermined schedule.
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