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Business Finance


Supply and Demand

Is it possible to provide health care without rationing? In 1948 every
household in Britain received a leaflet stating that the new National Health
Service would "provide you with all medical, dental and nursing care. Everyone -
rich or poor, man, woman, or child - can use it or any part of it. There are no
charges, except for a few special items."

a) This pioneering system of
health care provision, which celebrated its 60th anniversary in 1998, was based
on the assumption that the quantity of health care that would be demanded at a
zero price is finite. The quantity demanded nevertheless overwhelms the quantity
supplied at the zero price in Britain and all the countries that subsequently
initiated similar systems and found themselves confronted by shortages of health
care services. How would a shortage show itself in such a situation?

If health care is made available to everyone at a zero money price, and at this
price the quantity demanded exceeds the quantity supplied, how will heath care
be rationed?

c) What system of rationing would you recommend?

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