Health Markets Basics

Question 1

Positive analysis

Answer 1

“is” statement, can be proven or disproven (not subjective)

Question 2

Normative analysis

Answer 2

“should be” statement, how some people think something should be (subjective)

Question 3

When do you use positive and normative analysis?

Answer 3

Use positive statements to make normative analysis

Question 4

Rationality

Answer 4

individual is trying to maximize their wellbeing/utility subject tot he fact that they have income restraints and the prices that they face in the market

Question 5

Constrained optimization

Answer 5

consumers maximizing their utility and firms minimizing costs

Question 6

Ceteris paribus

Answer 6

in order to focus on effects of one change, everything else must be held constant

Question 7

Scarcity

Answer 7

there are not enough resources to provide all of the goods/services desired by a society

Question 8

Opportunity cost

Answer 8

if resources are used for one opportunity, they are forgone for another opportunity

Question 9

Market

Answer 9

the collection of buyers and sellers, that, through their potential interactions, determine the price of a product

Question 10

Relationship between price and demand

Answer 10

inverse relationship (price increases, demand decreases)

Question 11

What factors influence consumer demand?

Answer 11

the price of related goods and services, the number and type of people who demand the good/service, consumer income, consumer preferences, consumer expectations about future prices

Question 12

Elasticity

Answer 12

measures the responsiveness of quantity demanded to changes in price

Question 13

Elasticity equation

Answer 13

percentage change in Q/percentage change in P

Question 14

Elastic

Answer 14

very responsive to changes in prices

Question 15

Perfectly elastic graph

Answer 15

horizontal line

Question 16

Inelastic

Answer 16

not responsive to changes in price, quantity demanded would fall less than 1% if price increased by 1%

Question 17

Perfectly inelastic graph

Answer 17

vertical line

Question 18

Income elasticity

Answer 18

measures the responsiveness of demand to changes in consumer incomes

Question 19

Income elasticity equation

Answer 19

percentage change in Q/percentage change in income

Question 20

Cross price elasticity

Answer 20

measures the responsiveness of demand to changes in prices of another good

Question 21

Cross price elasticity equation

Answer 21

percentage change in Q of X/percentage change in price of another good (P of Y)

Question 22

Supply

Answer 22

willingness of firms to sell at different prices and different quantities

Question 23

Factors that affect market supply

Answer 23

number of firms in the market, changes in tech, changes in input prices, prices of related goods/service, producer expectations of the future

Question 24

Assumptions used in model markets

Answer 24

perfect and free information, price taking, private goods, lots of buyers and sellers, private decisions, free entry and exit, homogenous product

Question 25

Perfect and free information

Answer 25

all market participants have free and immediate access to accurate information about prices and quality

Question 26

Price taking

Answer 26

no market power, prices are taken as given

Question 27

Private decisions

Answer 27

choices by individuals do not affect the welfare of others (no externalities)

Question 28

Private goods

Answer 28

no public goods, all goods are rival and excludable

Question 29

Market clear price

Answer 29

where supply and demand are equal

Question 30

Consumer surplus

Answer 30

the difference between the maximum value the consumer is willing to pay and the amount they actually pay in the market

Question 31

Producer surplus

Answer 31

difference between the market price and the price the seller is willing to sell

Question 32

Social welfare

Answer 32

combined areas of consumer and producer surplus

Question 33

Market equilibrium

Answer 33

market clearing price and quantity

Question 34

Demand curve

Answer 34

willingness to pay

Question 35

Supply curve

Answer 35

willingness to sell

Question 36

Market deadweight loss

Answer 36

rather than transferring the surplus between consumers and producers, the surplus is lost

Question 37

Market disequilibrium

Answer 37

NOT market failure, trading off efficiency for greater equity

Question 38

Examples of market disequilibrium

Answer 38

price restrictions, rent control

Question 39

Market failure

Answer 39

when information asymmetry, market power, externalities, or public goods occur

Question 40

What occurs when there is market failure

Answer 40

there is inefficiency that is created

Question 41

Universal healthcare

Answer 41

all people have access to quality healthcare services when and where needed without financial hardship, DOES NOT mean you have completely free access to all healthcare

Question 42

5 ethical values

Answer 42

universal access, equitable access, cost/affordable access, quality, choice