Input+Marktes+-+Value+of+the+marginal+product+-+Induced+demand.&nbsp;+Supply++and+demand+in+labor+markets,+wages+of+physicians+etc.


 * Input Markets**

Marginal product can be defined as the change in total output based on a single unit of change in variable input. This is important because it shows the advantage or contribution of a certain factor to the production of health care or services. Due to the fact that some inputs will be fixed, the variable input will eventually result in smaller additions to total output than before. This is also known as the law of diminishing marginal productivity. This can be seen in a clinic where more physicians are being hired. With the addition of one or two more physicians, the clinic will be more productive because they can increase the number of patients that they see in a day. While the addition of ten more physicians may also produce small additional benefits, a clinic only has so much space and they will not be adding the same additional amount of productivity as the first few physicians would.

Induced demand can be described as the increase in the amount of consumption of a good resulting in an increase in the supply of that good. This goes along with the theory of supply and demand. Just as there is a market for buyers and sellers, there is also a market for labor. In a labor market, individuals decide if they are willing to supply labor, and different firms decide how much labor to buy. Firms make up the demand and individuals create the supply of labor. The supply and demand curves for labor help to determine the amount of labor to be purchased and the price at which it will be purchased. Firms decide the amount of labor they want based on their resources and the amount of work that they have to complete. Then individuals can decide how much labor they are willing to provide for the offered wage.

There is a demand for physicians in medical care. Obviously they play a key role in the care of patients. Many would say that there should be a large enough supply of physicians because of the salary that it involves. However, there are many things to consider. Physicians do make a large amount of money, but they also lose money when dealing with insurance and other issues. A person also has to consider the risk of malpractice lawsuits and other unforseen circumstances. An individual has to decide if it is worth the risk. With any job in the health care field, an individual must decide if wages that they will receive will justify the type and amount of work that they will perform.

There is an incredible demand for nurses at the present time. Due to this fact, hospitals may offer nurses higher wages or signing bonuses for working for them. The job that they do is very difficult, and one must feel that the amount that they are being paid is adequate for the work that they are doing.


 * Questions**

1. As the variable input increases a. the total output continues to increase steadily b. successively fewer additions to total output result c. total ouput stays the same Answer: B

2. In a labor market, the firm makes up the ___ portion a. supply b. equilibrium c. demand Answer: C

3. T/F The forces of supply and demand both determine wage rate and the number of people employed. Answer: True


 * Sources**

Santerre, R.E., & Neun, S.P. (2007). //Health economics: Theories, insights, and industry studies// (4th ed.). Mason, OH: Thomson South-Western.

http://en.wikipedia.org/wiki/Induced_demand http://www.sparknotes.com/economics/micro/labormarkets/labordemand/summary