Chapter 5 - Chapter 5 Demand for medical care is a derived...

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Chapter 5 09/04/13 Demand for medical care is a derived demand o EX: People want labor because they want to produce the good—the demand for labor depends on the demand of the good o People want medical care so that they can have good health (the desire is not for medical care itself) Law of demand: there is… o SEE HANDWRITTEN NOTES FOR GRAPH o Quantity is always on horizontal axis, price on vertical Reasons for inverse relationship: o Substitution effect: as the price falls, you’ll substitute that other than something that causes more (?) o You have a certain amount of dollars to spend, when your income goes up you can buy more of whatever the product is Change in quantity demanded: o When the price of this product (like medical care) changes, you’ll move from one point on the existing demand curve to another point (no shifts in the curve) Change in own price, move along existing curve o SEE POINTS A AND B ON DEMAND CURVE GRAPH Change in demand: o When there is a change in something you were keeping constant o When something other than price changes o Draw new curve o SEE GRAPH Factors that cause demand to shift o Income Normal good: demand will increase when income increases (curve shifts right) EX: doctor office visits Inferior good: when income goes up your demand for that good will fall (curve shifts left) EX: public health clinic (the wait is longer, so with more money you’d go somewhere else probably) o Prices of related goods Complements: goods used together—if the price of good x goes up the demand for good y goes down (curve shift left) EX: braces Substitutes: if the price of good x goes up the demand for good y goes up (curve shifts right) EX: price of contact lens increases, the demand for eyeglasses would increase because it’ll be a cheaper alternative o Time costs
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EX: if health clinic (on campus) moves to the stadium, that’s more time and so we would be less likely to use it (demand curve shifts left) EX: doctors in a small town have lower costs than doctors in a metropolitan because of more competition, but also because it’s more convenient for those there to just go to a doctor in their town o Tastes and preferences: impacts from lifestyle choices, advertising o Profile: stuff we’re born with EX: as we age, the demand for medical curve will increase (the curve will shift right) o State of health: When we’re healthy we’re less likely to demand medical care EX: an accident would shift the curve to the right o Quality of care: EX: if you believe you will get a better quality of care you will have a greater demand—you recognize certain names and you know they have a good
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