Question

Using a supply-and-demand graph and assuming competitive markets, show and explain the effect on equilibrium price and quantity of the following.

1. Increased graduation of new doctors on the market for physician services.
2. Increased awareness of a healthy diet in the population on the market for hospital services.

Answer 1

a) if the graduates are increasing in the market then the supply curve of the doctors will shift to the right and the new output in the market will be at a lower price and higher output.

b) If the people are more aware about the health then the demand for the health care services will fall and the demand curve will shift to the left. the new equilibrium will be at a lower price and lower output.