Social loss caused by moral hazard The vertical distance between $ Pu and P shows the extent of extent of price sensitivity. price distortion. This distance helps determine : the social loss from moral Pu hazard. A : social The angle between the loss extent demand curve DC and the of price: distortion vertical represents the extent of price sensitivity. P …444…704… The larger this angle is,the more responsive behavior is to price distortions and the larger the Dc social loss from moral hazard. Qu Q1 Bhattacharya,Hyde and Tu-HealthEconomics Bhattacharya, Hyde and Tu – Health Economics Social loss caused by moral hazard • The vertical distance between PU and PI shows the extent of price distortion. • This distance helps determine the social loss from moral hazard. • The angle between the demand curve DC and the vertical represents the extent of price sensitivity. • The larger this angle is, the more responsive behavior is to price distortions and the larger the social loss from moral hazard