Affect The Change In Supply And Demand Within The Health Care Industry

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Business Proposal Angela Demus ECO/HC561 May 23, 2011 Cristina Marine Business Proposal The economic contribution of nursing care facilities have grown exponentially since 2008. Our population continues to increase in age, the demand for nursing facilities has also increased because of their ability to provide multi-faceted care such as rehabilitative, therapeutic and long-term care. In 2008, just under 16,000 nursing facilities participated in Medicare and Medicaid and cared for 3.2 million individuals (Care Context, 2011). Nursing facilities greatly have affected the change in supply and demand within the health care industry. One of the most notable changes is the economic impact that the industry has produced. In 2008, the industry employed over 1.6 million Americans, and generated $200 billion in economic activity (Care Context, 2011). This economic contribution is solely based on the demand for services needed in an effort to provide and maintain quality health care for an aging population. With the demand increase, supply also increases in terms of need for more nursing facilities, staffing and services and goods. Job creation has been the major factor affecting demand and supply. Patient increase led to more nursing facilities being erected and providing essential services and goods that stimulate economic growth within the marketplace. Equilibrium price is a determinant that affects the quantity demanded by the consumer and what the facility will supply in terms of service is congruent. Therefore, the demand and supply curve will shift. This determines equilibrium price and its affect in the market (quantity). Equilibrium price and quantity factors also examines the preference and tastes of the consumer. If the consumer’s demands changes in favor of services and goods, the demand curve can shift in a positive (right) direction, thus supply as well as equilibrium price and quantity will follow. As positive directions occur there is also the potential for negative outcomes to exist. These effects such as loss in revenue can cause change in the supply curve, thus creating a rise in quantity in the market and a decrease in the equilibrium price. The pricing decisions for the nursing facility are elastic because consumers’ can only pay for the services at a certain price point. The government is a major contributor to the financial stability of nursing care facilities. Therefore, when they assess their budgets, the organization’s focus is economically based. The institutional focus is on how to institute services (supply) at a particular