Question

A student claims that, “healthcare is too expensive, a price ceiling can make healthcare more affordable.”...

A student claims that, “healthcare is too expensive, a price ceiling can make healthcare more affordable.”

(a) Explain why a price ceiling can reduce the quality of healthcare provided.

(b) Explain why a price ceiling makes it more difficult for people to receive healthcare.

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Answer #1

A) price ceiling is a maximum limit imposed on the price in the market of a product or a service. in case of health services it implies that a particular health service will have a price ceiling. It would be binding if the market price of the providing that health service is greater than the ceiling price. in that scenario the quantity supplied will be less than the quantity demanded and there will be a shortage of healthcare services. this is the reason why price ceiling can reduce the quantity of healthcare provided

B) it makes difficult for people to receive healthcare because now there is more quantity demanded but the supply is limited. This indicates that not everyone who is willing to pay the price at the price ceiling is able to get the health care service. Ultimately this will result in the evolution of black market where health services will be provided at a very high cost.

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