Health care spending growth is outpacing spending growth in other sectors of the economy, growing from 5% of GDP to 17.9% in 2016. Spending growth can arise from an increase in the quantity of care, an increase in the price of care, or both. a. Give two reasons why the quantity of health care consumed has increased over time. Explain. b. Since 1980, the price of medical care has increased 6.7 times as measured by the medical care consumer price index. Explain why it is difficult to track changes in prices for medical care. c. Consumers may benefit if price increases reflect an increase in the quality of medical care, but may be hurt if price increases do not reflect an increase in quality. For example, in 2015 Turing Pharmaceuticals raised the price of toxoplasmosis treatment Daraprim by over 5000%, from $13.50 to $750 per pill. Using a diagram of supply and demand, show how a price increase initiated by suppliers can make consumers worse off when there is no accompanying quality increase. On your graph indicate the equilibrium price, quantity, consumer surplus, and deadweight loss before and after the price change.
Health care spending growth is outpacing spending growth in other sectors of the
economy, growing from 5% of GDP to 17.9% in 2016. Spending growth can arise from an
increase in the quantity of care, an increase in the price of care, or both.
a. Give two reasons why the quantity of health care consumed has increased over time.
Explain.
b. Since 1980, the price of medical care has increased 6.7 times as measured by the medical
care
medical care.
c. Consumers may benefit if price increases reflect an increase in the quality of medical
care, but may be hurt if price increases do not reflect an increase in quality. For example,
in 2015 Turing Pharmaceuticals raised the price of toxoplasmosis treatment Daraprim by
over 5000%, from $13.50 to $750 per pill. Using a diagram of supply and demand, show
how a price increase initiated by suppliers can make consumers worse off when there is
no accompanying quality increase. On your graph indicate the
quantity
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