The Role Prices Exhibit in the Entire Market Economy - Article Example

Article Review
Given that, supply and demand assessment can be quite complex, the newsletter helps the reader to separate changes in both demand and supply from activities alongside supply and demand curves. The newsletter offers a practical meaning regarding two forms of government interventions within the markets, comprising price controls and quantity controls. One major supposition deduced from the newsletter is that government price floors tend to form surpluses since they place prices higher than the equilibrium price. As a result, the quantity of goods or services supplied surpasses the quantity demanded. On the other hand, government price ceilings tend to form shortages since they institute prices lower than equilibrium, and as a result, the quantity demanded surpasses the quantity supplied. However, Mishkin & Eakins (2012), observes that the semi-strong outline inefficient market hypothesis is the one that makes the present market prices mirror information already present in the public domain. This is because market prices tend to adjust to any good information or bad news contained in the performance of the economy. Therefore, if a price ceiling imposed by the government becomes greater than the market equilibrium price, then the price ceiling would have no effect on the economy.

Nevertheless, Yetter concurs with Mishkin & Eakins that in a current market economy, prices serve the duo purpose of sending signals regarding relative scarceness of both goods and services (2012). This is more so through the provision of incentives to both buyers and sellers. Therefore, there will be no supply restrictions or encouragement in demand. Both observe that the price ceiling will hold, only when the equilibrium price is higher than the price ceiling, and coupled with a shortage of the service or goods. Furthermore, the newsletter asserts that, if the government makes market prices to be higher than equilibrium prices, then a surplus will follow. This is because more people will offer the services at a minimum price, compared to the number of people willing to pay for the service.

Yetter argument can be observed in the current healthcare market, whereby states governments, which incur most of their residents’ healthcare bills, have made prices increase (2013). Consequently, the high prices make the state governments implement price controls, such that massive physician shortage takes place and which leads to massive queues and patients' waiting lists. As such, only price caps enforced by the government will only force the healthcare prices to return to liberated market rates. Therefore, the issue becomes whether government intervention will affect the demand and supply of healthcare considering the far-reaching government regulations such as Obama-care. Yetter in the newsletter observes that any increase in anticipated price will change the supply curve towards the right (2012).

Yetter points out that in the case of airlines baggage, if the government enforces a price floor due to increasing charges, then passengers will increase the number of baggage considerably, such that airlines can make available space to be relatively fixed while refusing to inspect additional baggage. Therefore, in healthcare paid by the government, most people will be obliged to purchase insurance instead of buying as you go, which will, in turn, result in a right movement in demand-curve. This is because consumers are more price-insensitive when a third party is the one paying for the service (Mishkin & Eakins, 2012). Hence, this will in turn lead to a considerable increase in care prices, as the prices will keep on rising faster compared to inflation.

Therefore, a look at healthcare demand and supply using the newsletter price ceiling and price floor models will reveal that government intervention can increase access to most people's healthcare insurance. However, the question is whether it will increase real access to medical practitioners. This is because an assessment of the policy using Yetter assertions implies that, a strong obligation to time-consuming and pricey professional licensing conditions for physicians would mean that, for any given price for physician service the number of available physician hours should definitely increase.