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How does price and total quantity of medical services provided in a third-payer market...

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Mizdee | Student, Undergraduate | Valedictorian

Posted July 31, 2012 at 2:02 PM via web

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How does price and total quantity of medical services provided in a third-payer market compare to a market where the pruchaser pays the full cost?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted July 31, 2012 at 2:10 PM (Answer #1)

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In a market such as the one we have in the United States, the price and the total quantity of services consumed are greater than they would be in a system where the consumer bore the entire price of the medical services.  This is because consumers would be much more cost-conscious on their own and would have a much steeper demand curve.  As it is, consumers do not really know how much it costs them (or society as a whole) when they consume medical services.  Therefore, they are not typically very careful about what services they consume or what prices they pay.  If they were paying for the services directly, they would know more about them and would be less likely to pay higher prices or consume as many services.

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