Explain how a change in the following situation affects the demand for medical c

Question

Explain how a change in the following situation affects the demand for medical care and/or supply of medical care? Indicate whether equilibrium price and quantity increase, decrease, or stay the same. The market you are examining is the medical care market, i.e consider the price of medical care and availability of medical care services.

a) The adoption of cost decreasing medical technologies

b) An increase in healthy lifestyles

c) An increase in nurses salaries

d) An increase in the number of insured population

Explanation / Answer

(a) The adoption of cost decreasing medical technology will decrease the cost of medicare. This will be passed on to the consumers in the form of lower price. Thus the equilibrium price will fall and quantity will increase.

(B) A healthier lifestyle means lesser medical attention. The demand for medical services will fall. The price and quantity at equilibrium will fall.

(C) AN increase in nurse salary means the cost for hospital has increased. This means lower supply of medicare. The equilibrium price will increae and quantity will fall.

(D) Increase in number of insured person means increase in demand for medicare. The equilibrium price and quantity will increase.

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