Question

1.What are the likely consequences of the following events in the U.S. market for cosmetic surgery? Does the supply curve or the demand curve shift? In which direction? State whether the equilibrium price and quantity increase, decrease, or stay the same.

a.     Health insurance coverage is expanded to cover all elective procedures, such as tummy tucks, nose jobs, and liposuction.​b. Personal finance companies start a nationwide lending program for cosmetic procedures not covered by health insurance. c. Medical malpractice insurance premiums increase for plastic surgeons

Answer 1

a) An increased health insurance coverage for all the elective procedures will make the services more affordable and more people will demand it. The demand curve will shift to the right as more people are demanding surgery, this will also increase the price of the surgeries. The quantity of surgery will also increase.

b) As the personal finance company has increased lending activity for a cosmetic procedure which was not covered by health insurance earlier this will increase the demand for such Surgeries because people now have money to undergo such surgeries. This will shift the demand curve to the right at a higher price and higher quantity.

c) As the medical insurance malpractice insurance is paid by the surgeons has increased this will force them to increase the fee they are charging from the consumers. It will shift the supply curve to the left at a higher cost and lower quantity demanded.