Question

What are any major impacts of the macroeconomic business cycle on supply for the home healthcare industry – i.e. how might different phases of the business cycle impact this industry’s ability to acquire inputs such as labor, capital or materials? Explain.

Answer 1

Business cycle is represented by three phases; 1) phase of economic decline, 2) recovery, 3) economic growth.

Home healthcare industry signifies comparatively expensive healthcare service as healthcare professionals provide these services at the homes of by the professionals. So, during the first phase of business cycle when economic activity is down due to crisis, the supply of inputs such as labor, capital or materials is likely to be very high. This is because during the crisis income and output declines due to which demand of such services is expected to decline the most.

Since, demand for inputs is derived demand and is dependent on the demand for the good that is being produced by the inputs, so input demand will also decline during the first phase of the business cycle.

During the second phase, as the economy recovers, demand for home healthcare also recovers, so the price of the inputs starts to increase as their demand recovers.

Lastly, when the economy fully recovers then it would become very difficult to acquire the inputs used in providing home healthcare, as their demand fully recovers.