The figure given below represents demand for and supply of hospital beds in Anytown, U.S.A. , as shown by curves D and S1 in the following figure.If the hospital receives permission to expand, its new supply curve will be S2.Price level P1 is the fixed prospective payment reimbursement rate paid by Medicare to the hospital, regardless of actual cost. Figure 32.3 
According to Figure 32.3, the surplus of beds caused by the fixed reimbursement rate, before the hospital expansion, is the difference between _____ and _____.
Definitions:
Income Effect
The change in an individual's consumption resulting from a change in their income.
Normal Good
A good for which demand increases as the income of the consumer increases, showing a positive relationship between income and demand.
Income Effect
The impact of income fluctuations on an individual or an economy on the quantity of goods or services that is demanded.
Price Decreases
A reduction in the cost at which goods and services are sold, making them more affordable to consumers.
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