The table below shows the market for private long-term-care beds in two countries,Gothum and Camdon,which have identical demands but different supplies.
a)What are the present equilibrium fee and number of available beds in each country?
b)If demand were to decrease by 60 in each country,what would be the new equilibrium fee and quantity in each country?
c)What explains the different effects in the two counties?
d)From the initial situation in a),suppose that the government in each country wished to increase the quantity of beds available by 20.How much subsidy to residents would be needed in each country?
Definitions:
Risk-neutral
Refers to a mindset or condition where an individual or entity is indifferent to risk when making investment decisions, focusing instead on the potential returns without giving additional weight to the possibility of loss.
Expected Utility
a theory in economics that quantifies how choices are made when outcomes are uncertain, aiming to maximize the expected utility rather than merely the expected monetary value.
Marginal Utility
The additional satisfaction or benefit (utility) a consumer receives from consuming one more unit of a good or service.
Expected Value
The weighted average of all possible values of a random variable, considering the probabilities of each outcome.
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