Assess the role of production of health and demand and supply for medical care and health...

Assess the role of production of health and demand and supply for medical care and health insurance, and relationship of income and the demand for healthcare.

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Expert Solution

The demand for medical care and health insurance is always inelastic in nature or vertical . This is because medical care is a necessity . People cannot avoid medical care altogether even if prices are exhorbitant . The health parameter of the population determines this demand supply balance , better the health of the population lesser is the demand for medical care , while poorer the health conditions demand is more . Supply also changes accordingly . If the maximum population is healthy then the cost of coverage is lower for insurance companies , premiums are low and supply is more . But in case of medical care if people are relatively healthy then supply of medical care will be less . The equilibrium demand supply determines equilibrium quantity of health production . If equilibrium price is relatively low health production is higher .

Demand for healthcare depends very little on income . Even if a person has low income he will substitute healthcare for all other things since it is a necessity .

Rahul Sunny answered 1 year ago

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