Question

1. Why is the market for healthcare not like the market for Starbucks coffee?

2. Provide three characteristics that prevent health care markets from allocating resources efficiently?

3. What is Market failure?

please explain 3-6 sentences in brief.

Answer 1

1. There are a number of reasons because of which the market for healthcare is different from the market for Starbucks coffee. Firstly, consumers are much more involved while purchasing health care services as compared to while purchasing Starbucks coffee. This is because the stakes are higher while purchasing healthcare services as compared to purchasing a cup of coffee. Secondly, consumers have relatively more information regarding the product while purchasing coffee rather than while purchasing healthcare. Consumers have very less information while evaluating healthcare services. Thirdly, the barrier to enter the healthcare market is much higher than the barrier to enter the coffee market. Healthcare services require a high level of investment, specialized staff, licenses, various permissions from regulatory authorities, etc. Fourthly, there is a significantly higher level of ethical issues in healthcare services market as compared to the retail coffee market.