1. In your own words, use utility analysis and production theory to explain why the demand curve for medical care is downward sloping.
2. After reading the chapter on demand theory, a classmate turns to you and says, “I’m rather confused. According to economic theory, people demand a good or service because it yields utility. This obviously does not apply to medical services. Just last week I went to the dentist and had a root canal, and you can’t tell me I received any utility or satisfaction from that!” Explain to your classmate how utility analysis can be used to explain why he went to the dentist.
3. Use a graph to illustrate how the following changes would affect the demand curve for inpatient services at a hospital in a large city. a. Average real income in the community increases. b. In an attempt to cut costs, the largest employer in the area increases the coinsurance rate for employee health care coverage from 10 percent to 20 percent. c. The hospital relocates from the center of the city, where a majority of the people live, to a suburb. d. A number of physicians in the area join together and open up a discount-price walk-in clinic; the price elasticity of demand between physician services and inpatient hospital services is À0.50.
4. Many elderly people have purchased medigap insurance policies to cover a growing Medicare copayment. These policies cover some or all of the medical costs not covered by Medicare. Use economic theory to explain how these policies likely influence the demand for health care by elderly people.
5. If you are covered by a private or a public insurance plan, obtain a pamphlet outlining the benefits provided and the cost of the plan. Are there any copayments or deductibles? If so, use economic theory to explain how they may influence your demand for medical care.
6. In your own words, explain what a fuzzy demand curve is. Why does it exist? What are its implications? 15 BUS508 – Economics of Health and Medical Care Course Syllabus
7. In reaction to higher input costs, a physician decides to increase the average price of a visit by 5 percent. Will total revenues increase or decrease as a result of this action? Use the concept of price elasticity to substantiate your answer.
8. You have just been put in charge of estimating the demand for hospital services in a major U.S. city. What economic and noneconomic variables would you include in your analysis? Justify why each variable should be included in the study, and explain how a change in each variable would likely affect the overall demand for hospital services.
9. Define own-price elasticity of demand, and explain how it is related to the demand curve. Provide four reasons why the demand for medical services is likely to be inelastic with respect to its price.
10. You are employed as an economic consultant to the regional planning office of a large metropolitan area, and your task is to estimate the demand for hospital services in the area. Your estimates indicate that the own-price elasticity of demand equals À0.25, the income elasticity of demand equals 0.45, the cross- price elasticity of demand for hospital services with respect to the price of nursing home services equals À0.1, and the elasticity of travel time equals −0.37. Use this information to project the impact of the following changes on the demand for hospital services. 
    a. Average travel time to the hospital diminishes by 5 percent due to overall improvements in the public transportation system. 
    b. The price of nursing home care decreases by 10 percent.
    c. Average real income decreases by 10 percent. 
    d. The hospital is forced to increase its price for services by 2 percent.

Accountable health care leaders must respond to external factors in a way that is advantageous for the organization and the community. While health care organizations must strive to improve their financial positions, it should never be at the expense of the populations they are serving. For this Assignment, examine the following scenario and consider strategies to limit the negative impact of external factors and improve organizational success.

Scenario: A small independent hospital in rural Georgia is seeking to attain Magnet Status. This designation demonstrates to stakeholders that the organization is committed to delivering high-quality patient care. With this designation, the organization can easily attract and retain a highly-engaged clinical staff. Moreover, it provides the organization an opportunity to market itself to potential patients as the place to receive top-quality care. This means that the organization could realize a greater market share of insured and private pay patients traveling as far as 100 miles just to receive the quality services. It also positions the organization to enter into joint ventures with physician groups eager to provide new services, which would lead to increased revenue streams.
Although the designation sounds like a great opportunity for the organization, the board of directors is split on their support of this designation. The board members in support of the designation understand the great value that this program will bring to the facility; however, those in opposition learned from a research study that non-magnet hospitals had better infection control and less post-operative sepsis. They also learned from another study that working conditions in a magnet facility are not better than those in non-magnet facilities. Therefore, the dissenting directors have concluded that the organization should not invest its time and resources to seek this credential. The CEO must get support from an overwhelming majority of the board to move forward with pursuing this designation.
To prepare:
Review the provided scenario and consider external environmental factors that may impact the organization’s strategic planning (e.g., policy and economics, laws and ethics, health care quality, and population health).
Note: Your Assignment should show effective application of triangulation of content and resources in your conclusion and recommendations.
The Assignment
In a 2-page executive summary, do the following:
• Identify and evaluate the impact of external environmental factors on the strategic planning of the organization in the scenario.
• Recommend strategies to address these external factors and limit their influence on organizational operations.