Thursday, July 29, 2010

Americans Cut Back ... The Power of Price

Today's edition of The Wall Street Journal has an article (free content at this writing) that deserves your attention. Amid all of the discussion about health care, one aspect seems to be lost. What incentives are put in place for the consumer (patient) when a third-party payment system (whether private or public) stands between the consumer and the provider? To the extent that the "cost" of service is disguised, either by elimination or drastic reduction, what is the effect on the demand for service? If a more "realistic" price is available, do consumers change their demand for the service? If so, how? If not, why not?

It is possible that the recession is providing some answers. According to the article, Americans have begun cutting back on spending for healthcare. As a greater share of the cost is being transferred to consumers in a way that is immediately apparent, the demand curve may be shifting.

I would suggest you take a look at the article and see if there's anything you can use in your classes. I would be surprised if there isn't.

1 comment:

nisha said...

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