When the market price for physician services rises from 100 to 150 an office

# When the market price for physician services rises

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• When the market price for physician services rises from \$100 to \$150 an office visit, the quantity supplied rises from 10 to 12 million visits per week. • As soft drink supply is very iti t i h ft \$200 \$ Physician Services market 100 S Quantity (million 6-packs) Price 50 150 200 sensitive to price changes, soft drink supply is described as elastic ; as physician services supply is relatively insensitive to price changes, physician services supply is described as inelastic . \$150 \$100 4 6 8 10 12 Quantity (million visits) 2 16 18 20 14 Short Run – the period of time during which firms do not have sufficient time to change plant size. Supply tends to be inelastic in the short run. The Short and Long Run Long Run – the period of time during which firms have enough time to change plant size. – Supply tends to be much more elastic in the long run.
9 Changes in Supply Versus Changes in Quantity Supplied Change in Supply – a shift in the entire supply curve. Ch i Q tit S li d Changes in Supply and Quantity Supplied Change in Quantity Supplied – movement along the same supply curve in response to a change in price. Price (dollars) \$4.00 • If the market price for gasoline is \$4.00 a gallon, the supply curve for gasoline S 1 indicates Q 1 units would be supplied. A Change in Supply S 2 S 1 \$3.50 \$3.00 • If, somehow, the opportunity costs for petrol manufacturers changed then the supply of gas may change . • Consider the case where the • If the price fell to \$3.50, the quantity supplied would fall to Q 2 units (where Q 2 < Q 1 ). Quantity (units of gasoline per year) Q 3 • Consider the case where the cost of crude oil (an input in gasoline production) increases, the supply of gasoline at all potential market prices would fall. Now at \$3.50, Q 3 units are supplied (where Q 3 < Q 2 < Q 1 ). Q 2 Q 1 Changes in resource (input) prices – an increase (decrease) in resource prices decreases (increases) supply, shifts to left Supply Curve Shifters (right) Changes (advances) in technology lowers production costs and increases the supply curve (shifts to right) Elements of nature (good or bad weather, hurricanes, etc.) and political disruptions Changes in taxes – increases (decreases) in taxes decrease (increase) supply.