HE+HW5+-+Spring+2010

# HE+HW5+-+Spring+2010 - Department of Economics Health...

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Department of Economics Prof. Derek DeLia Health Economics 220:316:01 Spring 2010 HOMEWORK #5 This assignment is for practice purposes only. It will not be graded or collected. 1.) The supply and demand for labor are given by W=100+5L and W=2,000 – 10L, respectively. W represents the wage and L represents units of labor. a. What is the equilibrium W and L. Show your answer on a diagram. b. Suppose that employers provide health insurance benefits to workers at a cost of \$300 per unit of labor. Assuming that workers value the insurance at \$500 per unit of labor, what is the new equilibrium W and L? Show your answer on the diagram from part a. c. What did the introduction of health insurance do to the distribution of labor compensation across workers and employers relative to the equilibrium in part a? d. Are there any gains or losses in economic surplus relative to the equilibrium in part a? If so, calculate them. If not, explain why not. e.

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HE+HW5+-+Spring+2010 - Department of Economics Health...

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