Economics 415 Health Care Economics

1
Economics 415Health Care Economics

• Day 4

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Continuation from Day 3 and on to Day 4

• Markets Demand and Supply
• Demand and Law of Demand
• Supply and Law of Supply
• Measuring Supply and Demand Elasticity
• Equilibrium and Market Adjustment
• Taxes, Subsidies and Health Insurance

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Day 3 (cont.) Determinants of Quantity Demanded
(QD)

• Own Price (-)
• Prices of Substitutes ()
• Prices of Complements (-)
• Income ( for normal gds., - for inferior gds.)
• Expectations (prices, incomes)
• Information
• Number of Buyers

4
Day 4 Quantity Supplied vs. Supply (QS vs. S)

• Same story as with Demand
• Quantity Supplied is a variable
• Supply is a function or relationship between
  Price and Quantity Supplied

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Day 4Determinants of Quantity Supplied (QS)

• Own Price ()
• Prices of Inputs (-)
• Prices of Complements in Production or
  By-Products ()
• Expectations
• Technology (Information of Sellers)
• Number of Sellers (special restrictions on
  entry?)

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Day 4Measuring Supply and Demand Elasticity

• Elasticity and Slope
• Ratio of percentage changes instead of ratio of
  changes
• ? ?QD/ ?P
• ?QD/?P x P/Q
• Unitless measurement
• Price Elasticity of Demand
• Average sensitivity of buyers to price changes
• Elasticity and Substitutes and Complements

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Day 4Measuring Supply and Demand Elasticity

• Price Elasticity of Demand and Revenues
• RP x QD
• Law of Demand P QD move in opposite
  directions, if one goes up, the other goes down,
  CP
• Marginal Revenue and Elasticity

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Day 4Equilibrium

• Prices higher than equilibrium
• Prices lower than equilibrium
• Speed of adjustment to equilibrium

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Day 4Taxes, Subsidies and Health Insurance

• Taxes and Supply and Demand
• Note on Taxes and Incidence
• Subsidies?
• Health Insurance