Price, Cost and Supply and Demand—Economics 101 overly simplified for the Congress and the President
In my first economics’ class in college, my instructor said that, if we learned the material presented, we would know more economics that 95% of the public. From what I can tell from the “Nationalized Healthcare” bill before Congress, we also will know more economics than any member of the libertine Democrats in Congress and the President.
First, Congress and the President can NOT change economic realities by pronouncement! Thus, the title of the bill is “America’s Affordable Health Choices Act of 2009.” The stated purpose of the bill is “to provide affordable, quality health care for all Americans and reduce the growth in health care spending, and for other purposes.” (Both quotes are from page 1 of H.R. 3200 which is 1017 pages long.)
If Congress names it AFFORDABLE, it most be affordable? And yet, the bill establishes a massive, NEW bureaucracy that has, according to Republicans, 32 new agencies—NONE of which will provide a whit of healthcare. Has Congress and the President ever heard of the concept of K.I.S.S.? Perhaps they can’t keep it simple when they are planning to CONTROL 16-17% of the American economy. And they are planning to pass the laws necessary to establish that control in about seven months.
In general, supply and demand—NOT Congressional edicts or pronouncements—determines price/cost. Price is what we as consumers must deal with. Cost is what a business (or the government trying to act like a business) must deal with. (For our purposes, we will primarily concentrate on price.) When supply and demand are in equilibrium, the price of the product and the quantity of the product are determined. Also, demand moves more quickly than does supply since, for example, it takes time to educate citizens to be doctors.
Thus, it takes time for supply to adjust to new demand equations. New electronic gadgets in the market begin at a higher price (It costs more per unit to produce a few units rather than thousands of units.) and as demand increases, the supply tends to catch up resulting in lower prices. One of the tricky aspects of a business is determining the original price for a new product—eventually the price is determined by supply and demand. (Some products can’t be given away; some have people lined up at the door.) Over the long run, the price of a product can NOT be lower than the costs to produce that product. (Duh! THINK GM which has now become Government Motors!)
In general, supply and demand is now in equilibrium and thus the price of healthcare at this point in time is determined. One does not have to agree with the price to have it in equilibrium. If now in equilibrium, what must happen to change the price of healthcare?
Demand side of supply and demand:
In general, if demand goes up, the price goes up. Greater demand means that people are willing to pay more for the same product. Conversely, if demand goes down, the price goes down. Over time, if demand goes up and price goes up, the supply will also increase as the increasing price means greater profit and this pulls more quantity into the equation. At some point, a new equilibrium is established.
Supply side of supply and demand:
In general, if supply goes up, the price goes down. Greater supply means that people are dedicating more resources for the same product. Conversely, if supply goes down, the price goes up. Over time, if supply goes up and price goes down, the demand will also decrease as the decreasing price reaches a saturation point. Healthy people don’t have as much need for a physician. JESUS, the SON of GOD, recognized this obvious truth when HE declared in another context, “On hearing this, Jesus said, ‘It is not the healthy who need a doctor, but the sick.’” (Matthew 9: 12 [NIV]) At some point, a new equilibrium is established.
So, economically according to general supply and demand concepts, what will the economic results be of the proposed bill before the House of Representatives? A DISASTER! Providing “affordable” healthcare insurance will automatically increase the demand for healthcare as it did when Medicare was first initiated. Low prices will generate greater demand—basic economics. (Here, the price is pulling demand instead of demand pulling prices because the government’s goal is “affordable” healthcare. They want to control price instead of allowing supply and demand principles to operate.) If demand increases, then price increases—the exact opposite of what the government intends!!!
Consequently, the government will eventually start setting prices to meet there alleged mandate of “affordable health choices.” But the price is set NOT by increased supply or decreased demand but by government edict. The demand remains high but there is NO incentive for supply to increase on the PRODUCTION side because their COSTS are TOO HIGH. The end result: RATIONING of services, WORSE healthcare not better, and HIDDEN COSTS because of government inefficiencies, bureaucratic red tape, increased taxes (but only on the rich supposedly!) and the attempts to CONTROL prices outside of supply and demand principles.
Government control of supply and demand has never succeeded in the long run under any government run system including our Medicare and Medicaid programs. These two government “run” programs are two very important reasons WHY healthcare costs are so high today! And yet, the Barack Hussein Obama administration wants to drastically INCREASE government CONTROL over supply and demand. IT WILL NOT HAPPEN SUCCESSFULLY!
Have we learned nothing from the past? Is it possible to repeat the same mistakes and get different results? One supporter of “Nationalized Healthcare” claimed we are the only advanced economy that does NOT have “Nationalized Healthcare.” My response is: SO WHAT! If other nations have chosen to drive over a cliff, should we also?
Ultimately, government CAN NOT CONTROL supply and demand. Therefore, ultimately, government CAN NOT CONTROL price. The Supreme Court early in its history ruled that the power to tax is the power to destroy. Thus, States can not tax the federal government and the federal government can not tax the State. However, the power to CONTROL is also the power to destroy. This insane desire to control supply and demand can NOT succeed. It will, however, make our healthcare system worse NOT better and NOT more cost efficient.
The Barack Hussein Obama administration is an ARROGANT administration! Within the last six months, it has declared that it thinks it has the power to control CLIMATE with its “Cap and Trade” bill. IT DOES NOT! Now, it thinks it has the power to control supply and demand. IT DOES NOT!
In my first economics’ class in college, my instructor said that, if we learned the material presented, we would know more economics that 95% of the public. From what I can tell from the “Nationalized Healthcare” bill before Congress, we also will know more economics than any member of the libertine Democrats in Congress and the President.
First, Congress and the President can NOT change economic realities by pronouncement! Thus, the title of the bill is “America’s Affordable Health Choices Act of 2009.” The stated purpose of the bill is “to provide affordable, quality health care for all Americans and reduce the growth in health care spending, and for other purposes.” (Both quotes are from page 1 of H.R. 3200 which is 1017 pages long.)
If Congress names it AFFORDABLE, it most be affordable? And yet, the bill establishes a massive, NEW bureaucracy that has, according to Republicans, 32 new agencies—NONE of which will provide a whit of healthcare. Has Congress and the President ever heard of the concept of K.I.S.S.? Perhaps they can’t keep it simple when they are planning to CONTROL 16-17% of the American economy. And they are planning to pass the laws necessary to establish that control in about seven months.
In general, supply and demand—NOT Congressional edicts or pronouncements—determines price/cost. Price is what we as consumers must deal with. Cost is what a business (or the government trying to act like a business) must deal with. (For our purposes, we will primarily concentrate on price.) When supply and demand are in equilibrium, the price of the product and the quantity of the product are determined. Also, demand moves more quickly than does supply since, for example, it takes time to educate citizens to be doctors.
Thus, it takes time for supply to adjust to new demand equations. New electronic gadgets in the market begin at a higher price (It costs more per unit to produce a few units rather than thousands of units.) and as demand increases, the supply tends to catch up resulting in lower prices. One of the tricky aspects of a business is determining the original price for a new product—eventually the price is determined by supply and demand. (Some products can’t be given away; some have people lined up at the door.) Over the long run, the price of a product can NOT be lower than the costs to produce that product. (Duh! THINK GM which has now become Government Motors!)
In general, supply and demand is now in equilibrium and thus the price of healthcare at this point in time is determined. One does not have to agree with the price to have it in equilibrium. If now in equilibrium, what must happen to change the price of healthcare?
Demand side of supply and demand:
In general, if demand goes up, the price goes up. Greater demand means that people are willing to pay more for the same product. Conversely, if demand goes down, the price goes down. Over time, if demand goes up and price goes up, the supply will also increase as the increasing price means greater profit and this pulls more quantity into the equation. At some point, a new equilibrium is established.
Supply side of supply and demand:
In general, if supply goes up, the price goes down. Greater supply means that people are dedicating more resources for the same product. Conversely, if supply goes down, the price goes up. Over time, if supply goes up and price goes down, the demand will also decrease as the decreasing price reaches a saturation point. Healthy people don’t have as much need for a physician. JESUS, the SON of GOD, recognized this obvious truth when HE declared in another context, “On hearing this, Jesus said, ‘It is not the healthy who need a doctor, but the sick.’” (Matthew 9: 12 [NIV]) At some point, a new equilibrium is established.
So, economically according to general supply and demand concepts, what will the economic results be of the proposed bill before the House of Representatives? A DISASTER! Providing “affordable” healthcare insurance will automatically increase the demand for healthcare as it did when Medicare was first initiated. Low prices will generate greater demand—basic economics. (Here, the price is pulling demand instead of demand pulling prices because the government’s goal is “affordable” healthcare. They want to control price instead of allowing supply and demand principles to operate.) If demand increases, then price increases—the exact opposite of what the government intends!!!
Consequently, the government will eventually start setting prices to meet there alleged mandate of “affordable health choices.” But the price is set NOT by increased supply or decreased demand but by government edict. The demand remains high but there is NO incentive for supply to increase on the PRODUCTION side because their COSTS are TOO HIGH. The end result: RATIONING of services, WORSE healthcare not better, and HIDDEN COSTS because of government inefficiencies, bureaucratic red tape, increased taxes (but only on the rich supposedly!) and the attempts to CONTROL prices outside of supply and demand principles.
Government control of supply and demand has never succeeded in the long run under any government run system including our Medicare and Medicaid programs. These two government “run” programs are two very important reasons WHY healthcare costs are so high today! And yet, the Barack Hussein Obama administration wants to drastically INCREASE government CONTROL over supply and demand. IT WILL NOT HAPPEN SUCCESSFULLY!
Have we learned nothing from the past? Is it possible to repeat the same mistakes and get different results? One supporter of “Nationalized Healthcare” claimed we are the only advanced economy that does NOT have “Nationalized Healthcare.” My response is: SO WHAT! If other nations have chosen to drive over a cliff, should we also?
Ultimately, government CAN NOT CONTROL supply and demand. Therefore, ultimately, government CAN NOT CONTROL price. The Supreme Court early in its history ruled that the power to tax is the power to destroy. Thus, States can not tax the federal government and the federal government can not tax the State. However, the power to CONTROL is also the power to destroy. This insane desire to control supply and demand can NOT succeed. It will, however, make our healthcare system worse NOT better and NOT more cost efficient.
The Barack Hussein Obama administration is an ARROGANT administration! Within the last six months, it has declared that it thinks it has the power to control CLIMATE with its “Cap and Trade” bill. IT DOES NOT! Now, it thinks it has the power to control supply and demand. IT DOES NOT!
posted by Christian Gunslinger at 4:47 AM
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