Question

Q1. Provide a response for each of the following cases? (Draw diagrams that show the changes in the supply and/or the demand; insert your diagrams as images) 1.1 Suppose that the treatment of a back problem by a chiropractor is an alternative for some of the treatments provided by orthopedic doctors. If the price of orthopedic surgery rises, how would this event affect the demand for orthopedic and chiropractic therapies?

1.2 Suppose that a health plan depends on a fee-for-service payment method, in which health care providers are paid for each individual service they provide. How would this affect providers’ supply of services and the demand for health care for uninsured patients?

1.3 Suppose that a technological breakthrough in the production of diet pills has occurred—every factory can now make these pills more cheaply than it did before. What would happen to the supply of the drug?

1.4 Suppose that the prices of Botox injections increased by 20%. How would this event affect the demand for this non-surgical cosmetic treatment if one discovered that the demand is perfectly elastic?

1.5 Suppose that licensure requirements become more stringent so that fewer physical therapists will be able to help people with physical disabilities. What would happen to the supply curve for rehabilitation services?

Answer 1

1.1A represents the fall in demand for orthopedic doctors because their price is relatively high and B represents rise in demand for chiropractors because their services are relatively cheap.

1.2 The supply will rise because fee would be received frequently but demand would fall because payments for uninsured patients would be difficult.

1.3 Supply would rise due to fall in cost of production.

1.4 Quantity demanded for cosmetic surgery would be zero because demand is perfectly elastic.All the demand would be aborbed by non-surgical treatment.

1.5 The supply would fall for to lesser availability of lesser physicians.

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