Question

In the traditional market model, there are major assumptions that impact the ability of the model to function efficiently. So far in the course, we have reviewed the first eight of these assumptions. It is important to relate them to the current provision of healthcare to determine the workability of the traditional market model.

Tasks:

• List the first eight assumptions of the free market.
• Discuss how each assumption is important.
• Explain your conclusions for each of the assumptions relating to today’s provision of healthcare.

Answer 1

- a free market is a system in which the price of goods and services are determined by the open market and by the consumers. In a free market the demand and supply is free from any intervention of the government or from any authority.

The assumptions of a free market are as follows-

I. Free market entry that is any eligible individual can mark his or her presence in the market.

II. A flexible market demand that is any one can purchase goods and service from the market.

III. There is a competition for price in the market as it is highly dependent on demand and supply.

IV. Output quality of goods and services are set by supply and demandand there is no surplus or shortafe of goods.

V. There are anti competative practices pervails in the market.

VI. There is no protection of common goods in the market.

VII. There is no proper information about the working of the market.

VIII. Private entrepreneurs are free to obtain and organise resources.

- Assumption of a free market are important because it encourages a large number of market participants and the free market is considered as the best interest of a firm to maintain imbalance of informations and to cunduct their business according to the prevailing market situations,the producers and the consumers in the free market always take rational decision to produce goods and services at lower price and to buy goods and services at low prices, the process of entry and exit from the market place is easy,there is a large number of firms who influence the market by selling homogenous products.and finally the action of an individual firm have a very little effect on the price in the market.

-As far as healthcare is concerned it is no longer a free market system in most of the countrues of the world or internationally,many countries are slowly turning into a socialist state which focus on social welfare and health care concerns are on top priority, there is a highgovernment intervention in healthcare sectors, they work accordingly to government set norms and standards, time to time the government ensure their safety and quality standards and there is no free entry and exit of any firms in health care system. So in todays scenario the healthcare system cannot be considered as a free market system.