Consider the assumptions of the perfectly competitive market (below is a version

Question

Consider the assumptions of the perfectly competitive market (below is a version of the assumptions re-organized from the class slides). Based on your reading of the article "The Bitter Pill" and the class "Markets" slides, it is clear that the market for health care does not meet all of the criteria of a perfectly competitive market. Which violation do you think most distorts the market for health care. Describe how the health care industry violates the assumption and discuss the consequences (on quantity, prices, profits, quality)? 5) Prices are a signal to producers (how much to produce) and consumers (how much to buy).

Explanation / Answer

Following conditions of perfectly competitive maket are violated in healthcare segment:

These distortions lead to the overpricing of products. Customers tend to pay extra price for its products. there shall be fall in the quantity and profits of these firms are likely to witness upward movements.

higher price signals to producer to increase supply while suggests to buyers to reduce its demand.

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