this is for holding javascript data
James Moore-Stanley added Practically_this_means_that_if__.tex
almost 8 years ago
Commit id: 42b9a3babf8b7733bce4932971e2c18cfdb251dd
deletions | additions
diff --git a/Practically_this_means_that_if__.tex b/Practically_this_means_that_if__.tex
new file mode 100644
index 0000000..12d3059
--- /dev/null
+++ b/Practically_this_means_that_if__.tex
...
\\Practically, this means that if a firm in an oligopoly raises its price for a good, the quantity demanded will rapidly decrease. This is due to the substitution effect; if the price of a good increases, consumers will instead choose to buy similar goods at a lower price from other firms who have kept their prices constant (i.e. at a lower price than the aforementioned firm's new price). Therefore, not only will the average revenue decrease (as quantity demanded has decreased at a higher rate than the price units sold at has increased), but also total revenue, (expressed as $P*Q$) as the quantity demanded has has decreased at a much more rapid rate than price has increased. The second aspect of the curve to note is that below PL1 on the diagram, the demand curve is very inelastic. This is because for a large change in price, there is a small change in quantity demanded. This may seem somewhat counter-intuitive; if the price of one of the firms' goods is below the usual price for all firms, one would deduce that there would be a large change in quantity demanded, again due to the substitution effect favouring consumption at a lower price.
\\However, this is not what happens in reality. When one of the firms changes its price for a good, other firms will respond in order to be competitive with the firm offering consumers the lowest price. Over a short period of time, all firms are engaged in a 'price war' or 'bidding war', and the price rapidly continues to decrease. This also means that the average and total revenues will decrease when the price is below the 'industry standard' price i.e. the price and quantity that yield maximum profit. It is, therefore, in the interest of all firms in an oligopoly to keep their prices constant. However, this may lead to inefficiency. If costs of production to a supplier decrease, the supply curve will shift out and to the right, meaning that a greater quantity is supplied at a lower price. In this scenario, lower costs of production may translate to increases in quality of healthcare products, meaning that delivering healthcare is less expensive, i.e. fewer costly operations need to be performed and subsequently paid for by insurance companies. However, because any change in price leads to lower total revenues, the price at which insurance will be supplied will not decrease.
\\Therefore the expenditure per person on healthcare is higher than is necessary. It could therefore be said, that if an oligopoly of insurance companies does exist, it would lead to much higher prices than necessary.
\subsubsection{Types of Inefficiency}
\subsubsection{Economies of Scale}
\subsection{Asymmetric Information}
\subsection{Consumer Choice}
This subtitle may be somewhat misleading, naturally if people can afford to consume healthcare, it is a high priority for disposable income. Looking beyond the necessary care such as surgery for appendicitis or broken bones, there is almost just as much healthcare available to consume that is not necessary for sustaining life, but serves as enhancing personal satisfaction
\subsection{Ownership of the Market- State or Private}
NHS monopsony?
