Question

When someone’s kidneys fail, the person needs to have medical treatment with a dialysis machine (unless or until they receive a kidney transplant) or they will die. Sketch a supply and demand diagram, paying attention to the appropriate elasticities, to illustrate that the supply of such dialysis machines will primarily determine the price.

Answer 1

The price of dialysis machines is mainly determined by supply, due to the highly inelastic demand for these critical medical devices, as demonstrated in a supply and demand diagram with a vertical demand curve.

Step-by-step explanation:

The question involves examining how the supply of dialysis machines affects their price, assuming a given demand. In such a case, the demand for dialysis machines is highly inelastic because patients who need them cannot easily forego treatment, and there are few substitutes for such a critical life-saving device. When sketching a supply and demand diagram, one would draw a vertical demand curve to represent perfectly inelastic demand. The supply curve would typically slope upwards, indicating that higher prices incentivize more production.

However, significant shifts in supply—whether due to technology, production costs, or regulatory changes—would drastically alter the equilibrium price since demand does not respond to price changes. If the supply is limited or decreases, it would cause a disproportionate increase in the price, underlining the fact that in case of dialysis machines, supply primarily determines the price.