Supply, Demand and Marginal Analysis on Health Care

¶ … economic tools and concepts which can be applied in the contemporary issues and typical, dynamic situations that are existent in today's health care industry. There have been numerous economic changes in the economy of the United States which in turn have come to have an impact and fashioned the current trends in the health care of the nation. These include economic aspects such as the financial recession which have had an impact on consumer patterns which in turn influences the level of demand for health care. For instance, most dental practitioners are private doctors and therefore the consumers make appointments as much as they wish. This implies that as a result of aspects such as recessions, the consumers will cut down their appointments unless they are urgent or in case of emergencies (Keegan et al., 2013).

In the same manner, recession affects the level of demand as it brings about the loss of health care coverage for several individuals as well as their households who are covered through employer arrangements. One of the most discussed topics in the health care sector are the reforms in the sector that have influenced healthcare costs significantly in the United States. The legislations that have been passed and the reforms instituted have brought plenty of discussion on the aspect of the quality of health care and the health care costs. This paper will employ demand curves, supply curves as well as marginal analysis as economic concepts and tools to undertake an analysis of health care costs between the United States and Europe.

Demand and Supply

These tools and concepts aptly measure and analyze impact of high costs on health care. The diagram below illustrates the health care costs and the dissimilarity that exists in supply curves and demand curves between Europe and the United States.

Price of Health Care

Supply

Equilibrium U.S.

Equilibrium Europe Demand (United States)

Demand (Europe)

Quantity of Health Care

Price of Health Care

Supply (United States)

Supply (Europe)

Equilibrium U.S.

Equilibrium Europe

Demand

Quantity of Health Care

The Demand and Supply Curves illustrated above offer two probable elucidations of high health care costs in the U.S. The first diagram shows that the level of demand in the U.S. is high while the second diagram shows that the level of supply in the U.S. is restricted or limited

The diagram properly illustrates that there is a higher level of demand for health care in the United States whereas for Europe the level of supply is restricted for both aspects. However, as Schmitz (2012), observes, neither aspect argued appears to be that convincing which makes it possible to question whether the context of supply and demand is comprehensive enough to make an analysis of health care.

In order to show that the aspects of demand and supply cannot comprehensively apply in health care it is imperative to analyze thoroughly to see how dissimilar it is in contrast to traditional models of business. The common perspective or understanding of demand is centered on the notion that every person will consume a certain good or service to the extent where the marginal value of an addition unit is equivalent to the price of such an extra unit (Schmitz, 2012). Here, however, the point of contention is that the consumer does not comprehend the value or worth of the treatment and health care that they receive. In numerous instances, the consumer does not pay the total price as a result of insurance. The common perspective of demand is somewhat skewed with regards to health care as opposed to other sectors.

The same case applies to supply. Here, too, we observe that the differences arise because the market structures in the U.S. And in Europe are different as a number of health care suppliers have substantial market power. However, this does not imply that we cannot attain any discernments from supply and demand reasoning. Thus, it is complicated to make a comparison of the price of health care between different countries as we have to also take into account the dissimilarities in market power (Schmitz, 2012). More so, it (price comparison) can also be difficult to determine as there are additional factors that influence the level of demand for health care between the two regions. For instance, it can be argued that there is more demand for health care in the United States than in Europe because individuals do not lead a healthy way of living. On the other hand, one might argue that there is minimal demand in Europe because certain nations such as Belgium have a small population, causing resultantly lesser demand.

Marginal Analysis

Another economic concept or tool that can be applied in this analysis is marginal analysis. Marginal analysis can be elucidated as the identification of the costs and concurrent benefits of different alternatives. In this case, marginal analysis is very relevant, particularly in the current public health care system as the ones who benefit by receiving the health care are the ones who can afford it. For individuals who are not able to afford it, it becomes relatively redundant. This is the case particularly in the United States. The consumers who find it affordable have a likelihood of being healthy eaters and leading healthy lives and in healthier settings. On the other hand, consumers who are not able to afford it are likely to live in less healthy settings. On the other hand, in Europe, all citizens are entitled to receive free health care. It is important to note that not all health care provided is free at the point of care but 97% of the costs are funded by the government (Gold, 2011).