Question

Using a demand-and-supply graph, show and explain the effect on equilibrium market price and quantity for health care of the following: A.price ceiling placed on physicians fees in the market for physician services. B.Increased graduations of new doctors on the market for physicians.

Answer 1

A price ceiling on physician fees decreases the equilibrium market price and creates a shortage. Increased graduations of new doctors in the market increases the equilibrium quantity and decreases the equilibrium price.

Step-by-step explanation:

Using a demand-and-supply graph, we can show the effect of a price ceiling imposed on physicians' fees in the market for physician services. When a price ceiling is set below the equilibrium price, it creates a shortage because the quantity demanded exceeds the quantity supplied. This leads to excess demand and long waiting times for medical services. The equilibrium market price decreases as a result of the price ceiling.

Now let's consider the increased graduations of new doctors on the market for physicians. This would result in an increase in the supply of doctor services. As the supply curve shifts to the right, the equilibrium quantity of doctor services increases, while the equilibrium price decreases. This means that there are more doctors available and the cost of their services decreases due to the increased competition.