Economics News Analysis
Iris Lau (11) F.4C
2005-12-05, 香港經濟日報, A26
P. 1
Economics News Analysis
Iris Lau (11) F.4C
Summary of the news:
As the law of demand states that as price increases, quantity demanded
decreases, vice versa, ceteris paribus. In this case, since the pregnant women from
the mainland China always do not pay the hospital fee, the public hospitals decide
to increase the hospital charges to those pregnant women in order to reduce their
quantity demanded for the services. As a result, after the public hospitals carried
out this plan from September 2005, quantity demanded for the public hospitals
service of the pregnant women from the mainland China are greatly reduced.
On the other hand, since private hospitals and public hospitals are in
competitive demand and they can be replaced by each other. Decrease in quantity
demanded for public hospitals service results in increase in demand for private
hospitals service. It is recorded that the demand for the private hospitals service
has increased 10% to 20% in October and November in 2005.
Explanation of diagrams:
Since the law of demand states that as price increases, quantity demanded
decreases, vice versa, ceteris paribus. Fig.1 shows that when price of the public
hospitals service increases (P1P2), it causes a movement up the demand curve.
Thus, quantity demanded for the public hospitals service decreases due to the law
of demand. (Q1Q2)
Fig.2 shows that as private hospitals and public hospitals are substitutes,
decrease in quantity demanded for public hospitals service causes increase in
demand for private hospitals service. The demand curve of private hospitals
service shifts to right at P1. (D1D2)
P. 2
Economics News Analysis
Iris Lau (11) F.4C
Diagrams:
Fig.1
P
P2
P1
D
Q
Q2
0
Q1
Public hospitals service
Fig.2
P
P1
D1
D2
Q
0
Q1
Q2
Private hospitals service
P. 3