Diferentiating_Between_Market_Structures

Differentiating Between Market Structures Differentiating Between Market Structures Most goods in the economy are allocated in markets, when a good does not have a price attached to it, private markets cannot ensure the good is produced and consumed in the proper amounts. Labor market equilibrium is affected by supply and demand because of the changes in the supply and demand curves. An existing relationship between the wage rate and the value of the marginal product shows how both factors move in the same direction. The wage rate is important to labor supply and demand because is a critical point that decides how the curves shift. The health care industry is full with competition to provide the best health care plans for those in needs. Consumers have a vast variety of choices to choose from and meet the consumer’s health care needs. AmeriChoice of New Jersey Inc. is one of many of those providers consumers can choose from. According to AmeriChoice a United Health Group (2010) “AmeriChoice is the premier provider in the United States of high quality, personalized public sector health care programs, serving more than three million people in Medicaid, Medicare and Children's Health Insurance Programs in 25 states and the District of Columbia.” (About Us, para. 2). Public and Private Goods, Common resources and Natural Monopolies In Chapter 11 when thinking about the various goods in the economy, it is useful to group them according to two characteristics: “Is the good excludable' Can people be prevented from using the good' Is the good rival in consumption' Does one person’s use of the good reduce another person’s ability to use it'” (Mankiw, 2010) Public goods are goods in which neither excludable nor rival in consumption. If one person consumes public goods, the amount available remains the same. Second, once public goods are available, no one can be stopped from consuming them. Private goods are goods in which both excludable and rival in consumption. Private firms provide private goods. Common resources are goods in which rival in consumption but not excludable. Natural Monopoly occurs when a good is excludable but not rival in consumption. A type of monopoly that exits as a result of the high fixed or start-up costs of operating a business, in a particular industry. In comparison public goods and common resources are closely related. These types of goods, externalities arise because something of value has no price attached to it. An example is the protection provided by police, fire departments, and the military. In comparison because of the external effects, private decisions about consumption and production can lead to an inefficient allocation of resources, and government intervention increases economic well being. Private goods are consumed and possessed by single users. In comparison with Natural Monopolies, in which one firm can supply a market’s entire demand for a good or service at a price lower than two or more firms can. In contrast private goods are both excludable and rival in consumption and natural monopoly is excludable but not rival in consumption. A situation in which this can be found is in the case of utilities or in which a market can support only one producer (Valentine, 2007). How Supply and Demand of Labor Affect Labor Market Equilibrium The labor market, as any other market finds the market equilibrium point in the intersection between the labor supply and labor demand curves. Supply and demand for labor is exactly the same as the supply and demand for a good or a service, the company becomes the demand for the good or service, and the worker becomes the supply. The price on the labor market is also known as the wage, this wage is dictated by the intersection of the supply and demand curves for a particular type of labor, which makes it the equilibrium point on the labor market. The labor market equilibrium is affected by changes in the supply and demand of labor because any shift in the curves will alter the equilibrium point. An increment in the labor supply lowers the equilibrium point and is more profitable for companies to hire more workers, thus the demand of labor increases, employment rate rises and the price of the marginal product lowers. On the contrary, if the labor supply decreases the equilibrium point is higher, and also the value of the marginal product. The demand for labor affects the market equilibrium because if the labor demand increases, the equilibrium wage raises, employment rises and also the value of the marginal product. If the demand for labor decreases, the market equilibrium falls lowering the equilibrium wage, employment decreases and lowers the value of the marginal product. Most changes in the demand for labor relate to the output price in the market, if the price raises the demand does the same, but if the price falls, so does the demand. Another factor to consider is technological changes. The demand for labor decreases when human labor is replaced by advanced machines; this affects the market equilibrium because it shifts the demand curve. The labor supply is affected by the wage rate, for example, the salary for many occupations is the same and there is a particular occupation with a higher salary, people will look to be hired for this job more than any other jobs. This particular scenario concludes that there is a positive relation between salary and the supply of labor. Imagine a graph in which the wage rate is on the vertical axis and the quantity of labor supplied is on the horizontal axis. It makes sense that the higher the wage rate, the higher the quantity of labor supplied, because it makes sense that people will be willing to work more when they are paid more. The demand of labor is also affected by the wage rate, for example, in the inclusion of a minimum wage for a particular occupation made by the government, if the wage is above the labor market equilibrium the labor supplied will exceed the demand for labor and this surplus result in unemployment. According to Hoover (2008), “Phillips conjectured that the lower the unemployment rate, the tighter the labor market and, therefore, the faster firms must raise wages to attract scarce labor. At higher rates of unemployment, the pressure abated.” (The Concise Encyclopedia of Economics, para. 2). Effectiveness of a Market Structure in an Organization AmeriChoice of New Jersey, Inc. is the company whose market structure was examined. The market structure of this company is the competitive market structure. AmeriChoice is a Health Maintenance Organization (HMO). The company’s parent company is UnitedHealth Group which has various business segments that operate throughout the United States. Each business segment specializes in a specific line of business. The segment in which AmeriChoice resides is their public and senior markets group. HMOs that operate within this segment, contract with each of the states in which they conduct business along with other HMOs that compete for the same business (and same population eligible for enrollment) with the states. To enter the state for business, HMOs usually have to submit a request for proposal. If accepted, they then must obtain something call a Certificate of Authority. Generally, an HMO, or any businesses, would be attracted to a specific state based on current competitors and current market penetration, rates, revenue potential and regulatory requirements. AmeriChoice operates within the State of New Jersey and was organized and approved to operate as a licensed Health Maintenance Organization (HMO) in 1995. They enrolled their first members in February 1996. This HMO’s market focus is the public and senior market sector. They are contracted with the Centers for Medicaid and Medicare as well as the State of New Jersey, to operate a Medicaid and Medicare managed care plan. Because basic Medicaid and Medicare benefits are standard, HMOs who operate in these markets offer consumers currently receiving these benefits through the state identical benefits. The part where differentiation enters is in what are considered value-added benefits. In this market, enrollees can switch from one plan to another monthly. Value-added benefits allow HMOs to differentiate themselves to either create or maintain a competitive edge within this market. An example of a value-added benefit would be a healthy pregnancy program. Although HMOs are expected to provide such a program, each HMO offers variations in the type of value-added program. *Factors That Affect Labor Supply *and Demand in an Organization According to the United States Department of Labor (2010) “About 595,800 establishments make up the healthcare industry; they vary greatly in terms of size, staffing patterns, and organizational structures.” (Health Care: Nature of the Industry, para. 2). AmeriChoice has to consider the needs of each individual when designing health care plans for the consumers. The demand for AmeriChoice to provide the individual health care plan to the consumers is high due to the volume of other choices consumers have at the consumer’s disposal. AmeriChoice has to provide the consumers with the correct match for the health care need of the consumer. AmeriChoice allows consumers the option of looking online to choose a care provider; AmeriChoice has developed its own software to monitor member access to services. According to AmeriChoice a United Health group (2010) “AmeriChoice uses a sophisticated clinical risk stratification tool to ensure that members are receiving optimal care” (About Us, para. 4). AmeriChoice has to be aware of the enrollment of new patients for the local physician’s office and to match the consumer with the correct specialty care provider for the consumer. Conclusion Goods differ if they are excludable and if they rival in consumption. An economy can focus on producing the goods and services it needs to function, but this may lead to an inefficient allocation of resources and hinder future growth. The labor market equilibrium is affected by supply and demand because of the shifts in the curves that will alter the equilibrium point. The equilibrium point in the labor market is known as the equilibrium wage. The equilibrium wage and the value of the marginal product are always moving in the same direction, if one rises or lowers, the other will do the same. The wage will dictate the behavior of the labor market for a particular occupation. If the government sets a minimum wage for a particular occupation, the supply of labor exceeds the demand and the surplus will result in unemployment. Consumers deserve options concerning health care and competition gives consumers more alternatives when deciding on who best to entrust their health care. AmeriChoice is one of many alternatives offered to consumers. AmeriChoice will remain competitive by offering quality care. It is good for the consumer that the health care industry is full of competition because it gives the consumer more options for substitutes, replacements or the use of competitive pricing when deciding on the best company to trust health care issues. AmeriChoice is one of many offering such a program to consumers and the way AmeriChoice can remain competitive with others in the field is by offering the quality care and input that the consumers deserve. References AmeriChoice a United Health group. (2010). Company Profile. Retrieved 14 April, 2010 from http://www.americhoice.com/en/aboutus/profile.jsp Ehrbar, A. (2008). Supply. Library of Economics and Liberty. Retrieved April 13, 2010 from http://www.econlib.org/library/Enc/Supply.html Hoover, K.D. (2008). Phillips Curve. Library of Economics and Liberty. Retrieved April 14, 2010 from http://www.econlib.org/library/Enc/PhillipsCurve.html Mankiw, N. (2010). The Economics of the Public Sector. In Principles of Economics (pp. 224-236). Mason, ohio: Cengage Learning. United States Department of Labor. (2010). Career Guide to Industries, 2010-11 _ Edition_. Retrieved 14 April, 2010 from http://www.bls.gov/oco/cg/cgs035.htm Valentine, G.P. (2007).“Gross Domestic Product (GDP).” Encyclopedia of Business and Finance. Ed. Burton S. Kaliski. 2nd ed. Vol. 1. Detroit: Macmillan Reference USA, 2007 (pp. 358-359). . Gale Virtual Reference Library. Web. Retrieved 19 April, 2010 from http://go.galegroup.com/ps/i.do'&id=GALE%7CCX1552100156&v=2.1&u=&it=r&p=G VRL&sw=w