Suppose the federal government will no longer provide financial support to hospitals (causing some public hospitals to close),but will instead give that money directly to taxpayers in the form of a tax credit on medical expenditures.What will happen to the equilibrium price and the quantity of physician office visits?

Question

Quizplus · Accepted Answer

In this instance,the removal of government assistance to hospitals will shift the supply curve to the left,but the increase in income via the tax credit will increase the demand curve.This will cause price to increase,but the change in quantity is uncertain.A large increase in demand relative to the change in supply will cause quantity to increase.If supply shifts by a greater amount than demand,then quantity will decrease.

Suppose the Federal Government Will No Longer Provide Financial Support