"It has been said that an increased number of physicians is related to an increase in the utilization of health care services - a concept known as physician-induced demand. In your opinion, is the utilization of health care related to greater access to care for those who previously could not get care, or do physicians provide unnecessary care to maintain their income in a competitive environment?"

Do not answer the opinion question asked by the textbook. Instead I want you to consider whether the concept of "physician-induced demand" is consistent with the market theory we've learned so far, or whether it could not possibly explain prices and quantities in a health care market unless we make some additional limiting assumptions. This analysis goes to the difference between a change in the quantity demanded that is provoked by a change in the price of the service, and a "shift" in demand, creating a new demand curve, provoked by something external but related to the market for the service. Please provide two-to-three sentence answers to the following questions to explore this issue:

1. If you shift a supply curve outward (as physicians are said to be doing), what happens to the quantity demanded and the price of the service? Does it make sense that this strategy would be undertaken to increase physician income? Why or why not?

Answer rating: 100% (QA)

The suggestion is misdirected which tends to believe that the increased number of physicians is rela... View the full answer