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


Without a third-party payer for education, the graph shows equilibrium tuition of P1 and equilibrium quantity of education of Q1. State support for education lowers tuition that students pay to P2. As a result, students demand Q2 courses per year. To provide that amount of education, educational institutions require tuition per course of P3. Without a third-party payer, spending on education is 0P1EQ1. With a third-party payer, spending rises to 0P3FQ2.