Researchers have concluded that the demand for annual preventive clinic visits by children with asthma equals 1 + 0.00004 × Y − 0.04 × P. In this equation Y represents family income and P represents price.
a. Calculate how many visits a child with a family income of $100,000 will make at prices of $200, $150, $100, $50, and $0. If you predict that visits will be less than zero, convert your answer to zero.
b. Now repeat your calculations for a child with a family income of $35,000.
c. How do your predictions for the two children differ?
d. Assume that the market price of a preventive visit is $100. Does this system seem fair? What fairness criteria are you using?
e. Would your answer change if the surgeon general recommended that every child with asthma have at least one preventive visit each year?