Appendix Chapter 4 Applying Supply and Demand

Analysis to Health Care

©2000 South-Western College Publishing

2

What does the demand curve for health care

look like?It is downward sloping

just as there is for other goods and services

3

What does the supply curve for health care

look like?It is upward sloping just like

the supply for other goods and services

4

P2

Q1

S

The Supply & Demand for Health CareP

Q

P1

P3

Q2

Copayment Q

D

A

C

B

5

What is thecopayment rate?

The percentage of the cost of services consumers pay out of pocket

6

What effect does the copayment rate have on the quantity of health

care demanded?It increases the quantity

demanded because people pay on average only 20% of the cost

7

What can cause shifts in the demand for

health care? A change in ...

• Number of buyers• Tastes and preferences• Income• Prices of substitutes

8

D1

D2

The effect of an increase in demand on market equilibrium for health care

P1

SE2

E1

P2

Q1 Q2

9

D1

D2

The effect of a decrease in demand on market equilibrium for health care

S

E2

E1

P2

P1

Q2 Q1

10

Increase in demand

Increase in equilibrium

price

Increase in quantity supplied

11

Decrease in demand

Decrease in equilibrium

price

Decrease in quantity supplied

12

What can cause shifts in the supply for

health care? A change in ...

• Number of sellers• Resource prices

13

D

The effect of a decrease in supply on market equilibrium for health care

S1E1

E2

S2

P2

P1

Q1 Q2

14

D

The effect of a decrease in supply on market equilibrium for health care

S2E2

E1

S1

P1

P2

Q2 Q1

15

Increase in supply

Decrease in equilibrium

price

Increase in quantity

demanded

16

Decrease in supply

Increase in equilibrium

price

Decrease in quantity

demanded

END