Week 4 Assignment: Applying Economic Principles and Tools to the Health Care
Issue of Rising Costs
Assignment Instructions:
In this assignment, you apply economic principles and tools (cost, demand, and market
demand curves) to the economic issue that you chose in the Week 2 activity. You are also
asked to complete a brief description of health care financing payment models.
Consider the health care issue that you identified in the Week 2 activity and address each
of the following:
- Explain how economic principles can be applied to this issue to effectively guide
decision making.
- Demonstrate how supply and demand curves are used to accurately assess the issue.
- Analyze how the cost curve can be used to assess the issue. Provide an example.
- Compare capitation, fee for service, and pay-for-performance financing payment
models to accurately reveal their similarities and differences.
- Use at least three credible academic sources in current APA format.
- Submit your work in APA 7th edition format.
, Introduction
The rising cost of healthcare is one of the most critical economic challenges facing both
developed and developing nations. In the United States, healthcare spending accounts for
nearly 18% of the Gross Domestic Product (GDP), making it the highest per-capita
expenditure globally (CMS, 2023). Rising healthcare costs affect affordability, access,
and quality of care, creating ripple effects across patients, providers, insurers, and
policymakers. Economic principles such as scarcity, opportunity cost, demand elasticity,
and market competition can be applied to understand and manage this issue effectively.
This paper uses core economic tools—supply and demand curves, cost analysis, and
payment model comparisons—to evaluate strategies for controlling and optimizing
healthcare spending.
Applying Economic Principles to Rising Healthcare Costs
Economic principles provide a foundation for evaluating the root causes and
consequences of escalating healthcare expenditures. Scarcity, a central economic concept,
underscores that healthcare resources—such as skilled professionals, equipment, and
medications—are limited, while demand is continually rising. As the population ages and
chronic disease prevalence increases, demand for medical services outpaces supply,
leading to higher prices. Opportunity cost also plays a significant role, as financial
resources devoted to healthcare cannot be allocated to other sectors such as education or
infrastructure.
Additionally, elasticity of demand in healthcare is often inelastic, meaning that
Issue of Rising Costs
Assignment Instructions:
In this assignment, you apply economic principles and tools (cost, demand, and market
demand curves) to the economic issue that you chose in the Week 2 activity. You are also
asked to complete a brief description of health care financing payment models.
Consider the health care issue that you identified in the Week 2 activity and address each
of the following:
- Explain how economic principles can be applied to this issue to effectively guide
decision making.
- Demonstrate how supply and demand curves are used to accurately assess the issue.
- Analyze how the cost curve can be used to assess the issue. Provide an example.
- Compare capitation, fee for service, and pay-for-performance financing payment
models to accurately reveal their similarities and differences.
- Use at least three credible academic sources in current APA format.
- Submit your work in APA 7th edition format.
, Introduction
The rising cost of healthcare is one of the most critical economic challenges facing both
developed and developing nations. In the United States, healthcare spending accounts for
nearly 18% of the Gross Domestic Product (GDP), making it the highest per-capita
expenditure globally (CMS, 2023). Rising healthcare costs affect affordability, access,
and quality of care, creating ripple effects across patients, providers, insurers, and
policymakers. Economic principles such as scarcity, opportunity cost, demand elasticity,
and market competition can be applied to understand and manage this issue effectively.
This paper uses core economic tools—supply and demand curves, cost analysis, and
payment model comparisons—to evaluate strategies for controlling and optimizing
healthcare spending.
Applying Economic Principles to Rising Healthcare Costs
Economic principles provide a foundation for evaluating the root causes and
consequences of escalating healthcare expenditures. Scarcity, a central economic concept,
underscores that healthcare resources—such as skilled professionals, equipment, and
medications—are limited, while demand is continually rising. As the population ages and
chronic disease prevalence increases, demand for medical services outpaces supply,
leading to higher prices. Opportunity cost also plays a significant role, as financial
resources devoted to healthcare cannot be allocated to other sectors such as education or
infrastructure.
Additionally, elasticity of demand in healthcare is often inelastic, meaning that
