Dynamics of Healthcare Markets
Module Two
The Traditional Competitive Model
- Briefly describe how consumers achieve utility.
- Describe what is meant by the term equilibrium and why the equilibrium outcome is desirable.
- Describe what a demand curve is and provide example of one you personally experience when purchasing combo goods. Does that hold for purchasing your healthcare? Why or why not?
- Explain the concepts of elasticity and price elasticity of demand.
- How do producers seek to maximize profits?
- Describe the notions of marginal cost and marginal revenue.
- Describe the production process and the variables affecting the production process.
- Describe ways short run and long run production differs.
- Explain what is meant by competitive market equilibrium.
- Describe the concepts of shortages and surpluses.
- Outline the effects of changes in supply and demand on equilibrium. (use a table if you wish)
- The Primary Care Enhancement Act or 2025 allows individuals to use their Health Savings Accounts (HSAs) to pay for Direct Primary Care. DPC charges a patients a monthly membership fee for an agreed upon amount of care (usually excludes labs). To meet service promises, DPC panels are smaller than standard primary care. The legislation was intended to lower healthcare costs. Using the constructs in the chapter, what in your opiniondo you think will happen to consumer demand, supply and price of primary care? Will it decrease or increase? BOLD THE CONSTRUCTS USED IN YOUR ANSWER. You do not need to use all constructs from the list.
Struggling with where to start this assignment? Follow this guide to tackle your assignment easily!
Step-by-Step Student Guide
Step 1: Understand Utility
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Utility means the satisfaction or benefit a consumer gets from consuming goods or services.
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Write a short explanation of how consumers choose goods/services to maximize their happiness within their budget.
Step 2: Define Equilibrium
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State that equilibrium is when demand = supply.
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Explain why this is desirable: no waste, no shortages, efficient allocation of resources.
Step 3: Demand Curve Example
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Define demand curve (shows relationship between price and quantity demanded).
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Provide a personal example: e.g., when buying a fast-food combo, as price rises you buy fewer.
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Reflect on whether this applies to healthcare (often not, because healthcare demand can be inelastic and influenced by need rather than price).
Step 4: Elasticity and Price Elasticity of Demand
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Define elasticity (responsiveness of quantity demanded to a change in price/income).
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Define price elasticity of demand (how sensitive demand is to price changes).
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Give a simple example: soda is elastic, emergency surgery is inelastic.
Step 5: Producers Maximizing Profits
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Explain that producers maximize profits by producing where marginal revenue = marginal cost.
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They also adjust prices, control costs, and improve efficiency.
Step 6: Marginal Cost & Marginal Revenue
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Marginal cost: cost of producing one more unit.
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Marginal revenue: revenue gained from selling one more unit.
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Profit maximization occurs where these two are equal.
Step 7: The Production Process
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Define the production process as transforming inputs (labor, capital, resources) into outputs (goods/services).
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Variables: technology, efficiency, cost of labor, availability of resources.
Step 8: Short Run vs. Long Run
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Short run: at least one input is fixed (e.g., factory size).
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Long run: all inputs can be adjusted, allowing full flexibility.
Step 9: Competitive Market Equilibrium
Step 10: Shortages and Surpluses
Step 11: Changes in Supply and Demand
Step 12: Primary Care Enhancement Act 2025
Helpful Resources for Research & Examples
