In a certain Midwest city, a series of studies were conducted to measure both the supply and demand for physician services at various price points. The table below represents the findings across ten different employers who offer self-insured health benefits to their employees. Observations were made across time at various price points and the data below was gathered. So, for instance, at a price of $50 for an office visit, the employees of Employer 1 consumed 150 visits per week; and at a price of $60, they only consumed 140 visits, etc. At the same time and in the same city, ten different primary care practices were observed and the data table below was generated. In this case, at a price point of $50 per visit, PCP1 was willing to supply 70 visits per week, but at $60, he would supply 80 visits, etc. Question #2 – assuming that, in the short-run, the supply of physician services will remain as expressed in Table 2 above, what will happen to the market clearing price and visit quantity? Show graphically what just happened. Again, in plain English, what is happening here? Table 2 Number of visits/ year Price/visit PCP 1 PCP 2 PCP 3 PCP 4 PCP 5 PCP 6 PCP 7 PCP 8 PCP 9 PCP 10 $ 50 70 40 57 45 50 47 91 110 40 50 $ 60 80 50 67 55 60 57 101 120 50 60 $ 70 90 60 77 65 70 67 111 130 60 70 $ 80 100 70 87 75 80 77 121 140 70 80 $ 90 110 80 97 85 90 87 131 150 80 90 $ 100 120 90 107 95 100 97 141 160 90 100 $ 110 130 100 117 105 110 107 151 170 100 110 $ 120 140 110 127 115 120 117 161 180 110 120 $ 130 150 120 137 125 130 127 171 190 120 130 $ 140 160 130 147 135 140 137 181 200 130 140 Table 2 Number of visits/ year Price/visit PCP 1 PCP 2 PCP 3 PCP 4 PCP 5 PCP 6 PCP 7 PCP 8 PCP 9 PCP 10 $ 50 70 40 57 45 50 47 91 110 40 50 $ 60 80 50 67 55 60 57 101 120 50 60 $ 70 90 60 77 65 70 67 111 130 60 70 $ 80 100 70 87 75 80 77 121 140 70 80 $ 90 110 80 97 85 90 87 131 150 80 90 $ 100 120 90 107 95 100 97 141 160 90 100 $ 110 130 100 117 105 110 107 151 170 100 110 $ 120 140 110 127 115 120 117 161 180 110 120 $ 130 150 120 137 125 130 127 171 190 120 130 $ 140 160 130 147 135 140 137 181 200 130 140 Solution With increase in price, demand is decreasing and with increase in price supply is increasing. hence price will be determined where quantity demanded equals quantity supplied..

1. In a certain Midwest city, a series of studies were conducted to measure both the supply and
demand for physician services at various price points. The table below represents the findings
across ten different employers who offer self-insured health benefits to their employees.
Observations were made across time at various price points and the data below was gathered. So,
for instance, at a price of $50 for an office visit, the employees of Employer 1 consumed 150
visits per week; and at a price of $60, they only consumed 140 visits, etc. At the same time and
in the same city, ten different primary care practices were observed and the data table below was
generated. In this case, at a price point of $50 per visit, PCP1 was willing to supply 70 visits per
week, but at $60, he would supply 80 visits, etc.
Question #2 – assuming that, in the short-run, the supply of physician services will remain as
expressed in Table 2 above, what will happen to the market clearing price and visit quantity?
Show graphically what just happened. Again, in plain English, what is happening here?
Table 2
Number of visits/ year
Price/visit
PCP 1
PCP 2
PCP 3
PCP 4
PCP 5
PCP 6
PCP 7
PCP 8
PCP 9
PCP 10
$ 50
70
40
57
45
50
47
91
110
40

2. 50
$ 60
80
50
67
55
60
57
101
120
50
60
$ 70
90
60
77
65
70
67
111
130
60
70
$ 80
100
70
87
75
80
77
121
140
70
80
$ 90
110

3. 80
97
85
90
87
131
150
80
90
$ 100
120
90
107
95
100
97
141
160
90
100
$ 110
130
100
117
105
110
107
151
170
100
110
$ 120
140
110
127
115

4. 120
117
161
180
110
120
$ 130
150
120
137
125
130
127
171
190
120
130
$ 140
160
130
147
135
140
137
181
200
130
140
Table 2
Number of visits/ year
Price/visit
PCP 1
PCP 2
PCP 3
PCP 4
PCP 5

5. PCP 6
PCP 7
PCP 8
PCP 9
PCP 10
$ 50
70
40
57
45
50
47
91
110
40
50
$ 60
80
50
67
55
60
57
101
120
50
60
$ 70
90
60
77
65
70
67
111
130

6. 60
70
$ 80
100
70
87
75
80
77
121
140
70
80
$ 90
110
80
97
85
90
87
131
150
80
90
$ 100
120
90
107
95
100
97
141
160
90
100
$ 110

7. 130
100
117
105
110
107
151
170
100
110
$ 120
140
110
127
115
120
117
161
180
110
120
$ 130
150
120
137
125
130
127
171
190
120
130
$ 140
160
130
147

8. 135
140
137
181
200
130
140
Solution
With increase in price, demand is decreasing and with increase in price supply is increasing.
hence price will be determined where quantity demanded equals quantity supplied.