With respect to healthcare how would a free market ie market

With respect to healthcare, how would a free market (i.e. market forces alone) answer each of the \"three economic questions\"?

Solution

The three economic questions are:-

What to produce?---- A free market economy decides what to produce based on the demand and supply of a product. This means that the question of what to produce is based primarily on the availabilty and demand for a product and not necessarily on what is actually needed. A healthcare provider would choose to produce a product that would bring it maximum benefits in relation to the cost of producing it.

How to produce?---- The question of how to produce deals with the method and means of production. For instance a company could produce a good by itself or could outsource the production to other companies and simply deal with the marketing and advertising of the product under its brand. In a free-market economy a healthcare organization would either produce goods by itself or outsource it to another firm depending on the costs involved. A company would outsource its production to a firm in a country where the cost of labour is cheap. Or it could setup its own production unit if the cost of land, labour and capital is cheap.

For whom to produce?---- In a free market economy, for whom to produce is decided based on the availability and affordability of the consumers. This is done taken into account the price determined by supply and demand. If there are a large number of consumers for a particular product which is available at a price that results in profit for the producer and is at the same time affordable by the target group, then the firm decides to produce that product. A healthcare organization would produce a product that is highly demanded by a large group of consumers who are willing to buy it at a price that is profitable for the firm.