Read “Critical Thinking – Case 3: How do Supply and Demand Work in Health Care? (p. 84), then
answer the questions below:
1. Contrary to conventional economics, physicians (the suppliers) typically decide the quantity and
type of health care services their patients (the demanders) will purchase. What is it about medical
services that usually allow the supplier to determine the demand?
2. Suppose a person who knows nothing about auto maintenance takes a car in for its 30,000- mile
checkup. The service manager reads off a list of repairs that need to be done. In your opinion, will
this person act like John did on learning the doctor’s diagnosis? Does the market for auto repairs
behave like the market for medical care? Should it?
3. Most people have a large part of their health care expenses paid by an insurance provider. Explain
how this might lead patients to pay little attention to the price of their treatment. Other than
insurance coverage, what other factors would cause a patient to pay little attention to the price of a
treatment?
4. Conventional economics suggests that a business with unsold, or surplus, merchandise will lower its
price to attract buyers. Do you think that a physician would lower the price of a procedure or a
hospital would lower its daily bed rate to attract patients?