Topic > Externality Case Study - 1284

For example a person has health insurance, so when he deliberately takes less care of his health knowing that his medical expenses will be fully covered, in that case the medical expenses will increase and this situation is known as moral hazard in terms of the medical sector. One of the key aspects that make the normal economic market different from healthcare is that economic markets work individually as in the normal economic market, buyers and sellers interact directly and set the prices of goods, services and wages. On the other hand in medical healthcare market they are interdependent on other markets like education, pharmaceutical sector, labor etc. Here education decides the number of nurses and doctors, on the other hand manpower industry decides how much an operation or surgery etc will cost. Therefore healthcare does not meet the criteria of ideal and perfect market conditions, so it is different from the economic market. Another factor is that demand in the healthcare market is very unpredictable, while demand in the economic market is quite predictable. Furthermore, there is information symmetry in the economic market but also in the consumer market