Go to The Economics of Health Care
Unit 2. The free market approach Page 23
2
 iii. Questions
i.What is a market - demand
                     
Questions.

1. Table 1 shows a hypothetical demand schedule for GP services in a town where there is no free health service.

Price of GP
consultations		 Quantity of GP consultations
demanded per month
0 600
£5 400
£10 150
£15 100
£20 90
Table 1

a) Draw a demand curve for GP services using this information.

b) If the price of a consultation is £5, what is the total amount that people will spend on consultations? Show this on your graph.

c) If the price of a consultation rose from £10 to £20, what would happen to the quantity demanded?


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i. What is a market - supply
                     
2. Table 2 shows a hypothetical supply schedule for GP services in a town where there is no free health service.

Price of GP
consultations		 Quantity of consultations GPs are
prepared to supply per month
0 0
£5 40
£10 80
£15 100
£20 150
Table 2

a) Draw a supply curve for GP services using this information.

b) If the price of consultations rose from £5 to £15, what would happen to the quantity of consultations GPs are prepared to supply?

c) Suppose the costs facing GPs rose by 10%, and this led to a 10% reduction in the quantity of consultations the GPs were prepared to supply at every price. Draw up a new schedule to show the effect of this.

d) Draw a new supply curve to show the effect of the increase in costs (on the same diagram as the original supply curve).


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i. What is a market - the market
                     
3. Use the information in Tables 1 and 2 to draw a market diagram for GP services.

a) What is the equilibrium price and quantity?

b) How much revenue are doctors then receiving?

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4. Use the information in Tables 1 and 2 to draw a market diagram for GP services.

a) A fall in costs causes supply to increase by 70 consultations per month at every price. Illustrate this on the market diagram.

b) What is the new equilibrium price and quantity?

c) Describe how the market reaches its new equilibrium position.

d) An increase in income now causes demand to increase by 70 consultations per month at every price. Illustrate this on the market diagram.

e) What is the new equilibrium price and quantity?

f) Describe how the market reaches its new equilibrium position.

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Is this the short cut to perfection?

In the quest for glamour and good looks, more and more youngsters are asking plastic surgeons to give nature a helping hand. Plastic surgery is gaining popularity among the young. At the Poutney Clinic, the average age for a nose job (rhinoplasty) is now just 22, down from 31 in 1985. The average for ear correction is 21. It is not yet as common in Britain as in America, where 640,000 operations were performed last year and where TV programmes like Beverley Hills 90210 suggest you're not allowed to graduate from a Californian high school unless you've got a liposuctioned bum. A 20 year old waiting for a breast enlargement operation at the West Hampstead Clinic when asked why now, replied "We've just got the money. My husband got a big quarterly bonus"

Adapted from an article by Robert Leedham, The Guardian 6.9.91
5. Read the passage on the left, then answer questions a) to e).

a) Why are more young people demanding plastic surgery?

b) What would you expect to happen to the price of plastic surgery as demand grows?

c) Try to draw a simple supply and demand diagram to analyse this information.

d) How would you expect suppliers to react to the increase in demand?

e) Market theory assumes that the consumers are able to make rational buying decisions. Do you think that this applies to cosmetic surgery?

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Activity

Carry out some further research on the market for cosmetic surgery among the young. Information on the treatments being offered can be found by looking at the adverts in the popular press or magazines. You might also survey your friends to try to identify the factors which influence demand.
2. The free market approach