Let's review some basic principles of supply and demand: If a government policy increases the demand for a service, the price of that service tends to rise. If the government prevents prices from rising, shortages develop. The quantity provided is then determined by supply and not demand. In the presence of such excess demand, the result could be a two-tier market structure. Consumers who can somehow pay more than the government-mandated price will be able to purchase the service, while those paying the controlled price may be unable to find a willing supplier.Or, if they currently live abroad, they travel to the U.S. to get procedures done.
Monday, November 16, 2009
Health Care Shortages
This is why Greg Mankiw writes great economics textbooks: he's clear and concise. Here is his explanation of the economics of health-care socialization: