Calculation of deadweight loss in health insurance.
Influenza Vaccination problem
Let's say there's a world-wide influenza pandemic. Assume that the marginal cost (supply) of influenza vaccinations is constant at $40. Assume that everyone in society has health insurance that pays 80% of all medical services, including flu shots. Draw a market demand for flu shots and show graphically what the socially optimal number of flu shots is (not considering lives saved). Elucidate how many flu shots will be given in this market given the insurance. Show the deadweight loss caused by the health insurance.