Economics and Health Care Economics Term Paper

Besides the health care has strong externality influences than that of other goods and services. The cost of caring a sick person may entail heavy financial burden on the patient's family.

In the real world markets for other goods and services tends to approach towards market perfection that assumes a strict set of conditions such as, perfect information, several sellers and buyers, a uniform type of product and freedom to enter and exit that makes certain that the firms producing the goods and services are only price takers, which are producing at the lowest probable cost in the long run and only capable of earning normal profits. The market fails when the producers have the authority to considerably influence the price or the total amount of quantity being produced. Doctors and other suppliers of health care sometimes have such enhanced authority. Moreover, the healthcare faces the problems of risk and uncertainty. Purchasing health care in a free market involves requirement of sufficient money to pay for it.

Health care is expensive and it is not possible to foresee when we are going to require it i.e. To become ill. Moreover, it is also not possible to postpone the purchase of health care which is often risky. The asymmetry of information establishes a relationship between the patients and doctors which is quite different from the normal relationship between buyers and sellers. The patient has to depend upon the doctors to act on behalf of them in their best interests. Such conditions also fail the consumer to understand the best for themselves and to choose that will maximize their total satisfaction.