Final answer:
To explain the pricing of dialysis services with a supply and demand diagram, one must consider the perfectly inelastic nature of the demand for dialysis—a life-saving treatment required when kidney failure occurs. The price elasticity of demand for dialysis is very low, meaning the supply of dialysis machines largely determines the price of the treatments.
Step-by-step explanation:
When kidney failure occurs, a patient must undergo hemodialysis, a medical procedure where a dialysis machine is used to remove wastes and excess water from the blood, essentially performing the work of healthy kidneys. If the supply of dialysis machines is limited and cannot meet demand, the price of dialysis services may increase significantly. To illustrate this, one could sketch a supply and demand diagram, indicating a vertical (perfectly inelastic) demand curve that reflects the urgent and life-saving nature of the treatment. The supply curve would slope upward, as usual, showing that increases in the price can lead to increases in the quantity supplied. However, the mostly inelastic demand suggests that changes in supply have a more pronounced effect on price than changes in demand would.
In conditions where dialysis is the only treatment available and the need for it is non-negotiable, the price elasticity of demand is very low—patients need treatment regardless of cost. This contrasts with other goods or services where consumers may stop buying or look for substitutes if prices rise. In the dialysis market, it's the supply of machines and the ability to provide treatments under the direct supervision of a registered nurse that play a critical role in determining the cost to patients and healthcare systems..