Surname 1

Full Name
Professor
Health Economics
Date
Health Economics
Are individual physicians able to influence the number and price of physician visits? Why
or why not?
No. The health care industry operates as a perfectly competitive market; the individual
physicians are price takers. Any attempts to raise prices will result in the patients oin to other
physicians. The physicians can only influence the num!er of physician visits; they can ma"imi#e
profits !y ensurin that they attract as many visits as possi!le under the prevailin market price.
Technological changes in the pharmaceutical industry did not result in lower
pharmaceutical prices of new drugs. Explain why.
The fact can !e attri!uted to different factors. First$ is an increase in the use of costly
technoloies and drus; the hih demand results in an increase in prices of drus. %econdly$ the
costs of developin new drus increased with the onset of technoloy. The hih cost of
developin new drus is a factor and a disincentive to new entrants who could lead to lower dru
prices; the few players have no incentive to lower prices. Technoloy advances have led to an
increase in the use of specialty care$ which is e"pensive due to hiher fees and more tests.
Do you think that the ! health care market is in e"uilibrium? Explain
No. The &% healthcare system operates under numerous threats affectin the market e'uili!rium
such as chanes in overnment reulations$ a reduction in insurance reim!ursement and
physician shortaes.
The ! has higher per capita income than most advanced economies. #ould higher health
expenditures per capita in the ! than in other countries be explained by the income
effect? Why or why not?
No. &nlike other countries$ the &nited %tates does not have a positive correlation !etween
healthcare spendin and income ()wachofi$ *+,,-. The country.s hih healthcare spendin can
!e linked to the !a!y !oom eneration$ which is enterin retirement and has more healthcare
needs. /ifestyle and !ehaviour patterns such as smokin also have a direct link with healthcare
needs and spendin in the &%. )ore than 0+1 of the &% citi#ens are o!ese; hiher o!esity rates
increase healthcare spendin. Physician spendin and use of hih2priced medical technoloies is
also relatively hih in the country.
Surname 2
References
Mwachof, Ari. "Health Care Market Deviations from the Ieal Market."Sultan Qaboos
University Medical Journal 11.! "2#11$% !2&'!(. )e*. 1( Se+t. 2#1,.
-htt+%..www.nc*i.nlm.nih./ov.+mc.articles.0MC!21##,1.1