Applications of Demand and Supply

Read this chapter and attempt the "Try It" exercises. This chapter will help you gain familiarity and competencies with regard to basic demand and supply concepts. At a minimum, you should be able to list the factors that shift the demand curve and those that shift the supply curve after completing these chapters. This will help you prepare for similar types of analyses in the units ahead.

4.3 The Market for Health-Care Services


  • The rising share of the output of the United States devoted to health care represents a rising opportunity cost. More spending on health care means less spending on other goods and services, compared to what would have transpired had health-care spending not risen so much.
  • The model of demand and supply can be used to show the effect of third-party payers on total spending. With third-party payers (for example, health insurers), the quantity of services consumed rises, as does spending.