Question

Suppose that a global health pandemic, known as “new-virus”, results in a dramatic increase in the demand for medical equipment and medically trained personnel. The rapidity of this increase far outstrips the ability of supplies of medical equipment and medically trained personnel to respond in the short-run.

1. Ignoring any impacts from health insurance or health care price regulation, what impact is this likely to have on the have on the price of health care services? (2 marks.)

2. Analyse the short-run impact of this shock on the optimal choice of health status, health care, and the composite “all other consumption” commodity in the Wagstaff model. (Interpret health status in this question to be separate of any direct health impacts of “new-virus”. In other words, assume, rather unrealistically, that there are no co-morbidities between “new-virus” and other diseases. Similarly, interpret health care consumption as excluding any health care consumption directly resulting from the treatment of “new-virus”.) (7 marks.)

If the shock that is being considered in this question had any short-run impact on the consumption of health care by the representative individual, then it might well also have a long-run impact on the representative individual’s stock of health capital. If the short- run impact of the shock involved a reduction in the consumption of health care, assume that there is a subsequent reduction in the stock of health capital in the long-run. If the short-run impact of the shock involved an increase in the consumption of health care, assume that there is a subsequent increase in the stock of health capital in the long-run. If the short-run impact of the shock involved no change in the consumption of health care, assume that there is no change in the stock of health capital in the long-run.

3. Suppose that, in the long-run, supply-side adjustments in the health care industry result in the price of health care services returning to its pre-shock level. (A sucient condition for this to occur would be for the health care industry to be a constant cost industry, resulting in a perfectly elastic long-run industry supply curve at the pre-shock price level.) Analyse the impact of the combination of this change and any change in the health capital stock for the representative individual that results from the short-run impact of the shock. (Hint: The long-run impact of this shock should be applied to the outcome after the short-run impacts of the shock have occurred.) (7 marks.)

4. Has the shock caused by “new-virus” had only a temporary impact on the representative individual’s use of health care, health status, and “all other consumption”, or only a permanent impact, or both temporary and permanent impacts?

Answer 1

1)As a new virus will spread in our surrounding,it will bring many unfavourable changes in society.During such kind of pandemic,people has to face a lot of socialas well as financial challenge .Health sector has to face many challenges as the need of health services will increase rapidly.As the demand of health services increase ,it will lead to increase in the prices of health services as well as health equipment.Though the demand of health services will increase but the number of the health care worker will remain same,hence their demand will also boost.ln such situation,some can be aware of their responsibility and carry on their work for public welfare as they were doing before.on the other some of the health care provider will look from the side of their profit and boost the price of their services.which will affect the middle and poor section of the society.As their service cost will increase they might not be able to have it and this could have adverse effect in economy.

2) as the new virus will spread,automatically it will infect large number of people hence, the need of the health care service wil expand continuously which can lead to short run of these health care.all these factor will adversely affect the life of common people.as the virus will survive for longtime it can lead to decrease in the stock of health care survives. As the stock of these health care services will decrease,more effort will be done to increase production of these health commodities. As the need of these commodities will increase on the other hand production will increase too, then it will cause no huge changes in the stock of these commodities.

3)as the demand of these health care sevices will increase it will cause to increase in price of these healh commodities after a while manufacturer will attempt to increase the production of these health care services as the impact or infection of viruses will be long time,as the production will increase the prices of these commodities will back to earlier price. Due to short run impact of these health commodities ,manufacturer will emphasistiwards increasing production as well as reducing the cost of these commodities.which will help in providing these health care services to poor people also and aid to bring normalcy in daily life.

4)as the worst impact of viral infection is faced by people allover the world,it can be temporary but the lessons learnt by the challenges due to virus might be permanent. I believe the shock caused by the new virusmight be temporary as well as permanent.It totally depends on the personal thinking of local people. Some people might aware thereself to fight any virus learning from the new virus crisis.on the other some people can ignore it ,once the virus had gone.so the effect on healthservices as well as health commodities can have both temporary as well as permanent depending on the observation of common people .

If you get the answer to the question that please thumbs up and thank you.