Posted by: erichosemann | December 14, 2009

Oversimplification of the Day

Economics 101:

Profits induce new producers to enter the market.    Profits can be made when prices are high–when prices are bid up by increased demand.  When new producers enter the market, prices are reduced because of competition.

Well…

Health care is expensive.  At least certain types of it.  Prices are high, in other words.  And the health care industry is certainly booming.  Why aren’t prices going down?

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Responses

  1. A possibility:

    Health care (or more accurately, health insurance) typically functions in an oligarchic situation, preventing real competition which could drive prices down. You either buy from one or two companies (if you can even afford it) or you’re SOL.

    • I agree–but what gives the oligopolists their footing? My instinctual guess, backed up with anecdote, is government, both state and federal.


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