ECONOMICS

POROMA

GR 11

Economics case study

  1. Explain whether health care is a private , merit or public care
  2. Is health care a free good? Explain your answer
  3. Does the quote from the doctor suggest that the market for healthcare is in equilibrium? Again explain your answer
  4. Compare the effects of an improvement in the quality of product provided by the NHS and that provided by a private health care company
  5. Explain 2 meanings of the word ‘efficiency’
  6. What is likely to happen to private sector firms which are not efficient?
  7. In which market structure is information about best practice likely to be most freely available
  8. Discuss the private and external benefits of health care.

  1. A public good is a good that is a benefit to society and is provided free of cost to society, usually by the government running the country. Theses goods are not provided by private companies and firms as they do not render profit, which thus leads to a market failure due to a lack of provision of public/merit goods.

Examples for such goods are roads, streetlights, education, public libraries etc.

 NHS (National Health Service) is a public good and government organization. It is a service that is ‘free at the point of delivery’ because society pays for it indirectly through taxes.

 

The NHS provides free healthcare to society, this is especially beneficial for the low income group sector of society thus making it a public good. The demand for this service is high, as healthcare is very expensive in the private sector.

As the law of demand states that when the prices increase demand decreases. Here there is no actual price for the service thus the demand must be high. But sometimes this high demand creates a problem as the supply cannot be met; public goods are goods that do not render profits.

And thus these organizations are run by government spending and may not really be updated with the best quality as they have a limit in their budgets. They do not have the quality of being efficient as they do not make profits from their services.

  1. A free good is good that is not scarce, has a zero market price and do not have any opportunity costs when consumed. The key word is opportunity cost.

(***Free good is a term used in  to describe a  that is not . A free good is available in as great a quantity as desired with zero  to .)

Opportunity cost is the cost of forgoing one opportunity for another. For example – A school has been given 10,000$ and it can either spend it on books and supplies or on a new gym. Thus the opportunity cost to build the gym would be the loss of not buying books and vice versa.

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An example for free good can be sunlight, air, salt water etc.

Considering healthcare, it can be noted that healthcare does not fall into the category of free good.

It is an economic good even a public organization like the NHS. As NHS is a government funded subject, it is actually just a free service at the point of delivery. The taxpayers pay for this good; therefore it does have a market value indirectly through taxes. And it is not a resource that is available all the time, thus making it limited and not scarce.

 

As ...

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