Exploring Organ Shortages, Demand, and the Grossman Health Model

This assignment delves into various aspects of health economics, primarily focusing on the persistent shortage of organs for transplant. It explores the reasons behind these shortages, including media influence, lack of public awareness, and legal restrictions on organ markets. The assignment analyzes how the demand for organs might defy the law of demand, particularly when substitutes are expensive or unavailable. It discusses the price elasticity of demand and supply in a hypothetical free market for organs, advocating for a regulated market to combat black market activities and ensure ethical practices. Furthermore, the assignment examines the impact of hypochondria and sudden income changes on an individual's optimal health level within the Grossman model, illustrating how increased health concerns and financial resources can influence health investments. Finally, it addresses the widespread belief about increased emergency room visits during full moon nights, citing scientific studies that largely debunk this claim.

Health Economics
a) (12 points):
(i) (4 points): Why do you think these shortages exist?
The organ shortage crisis has deprived patients of a better quality of life and has caused a
substantial rise in the cost alternative medical care i.e. dialysis. The following are some of the
reasons why organ shortage exists:
There has been a stream of media reports that give people the impression of widespread
malpractice by the medical fraternity and the funeral and biomedical industries. A number of
reports on court hearings involving organ malpractices have soared in recent times making it
hard for individuals to shun organ donation (Folland, Goodman & Stano, 2016).
Public awareness efforts have done little to improve donation rates in America and in other
countries. This being the best and easiest option to raise the number of donors, little has been
done in the area of public awareness.
The laws available are against allowing the market to function in order to get supplies to
people. Where there is government interference and the suppliers are not allowed to sell to
meet the demand then automatically shortages appear, this is what happens with the organ
industry especially that of kidney (Smith et al, 2013).
The disincentive factor. This comes along with financial obstacles that result in loss of money
for the donor including the loss of income while off work after the procedure. Potential future
insurability issues and expenses may also not be covered by insurance after the procedure.

Figure 1: demand and supply of Organ
(Zweifel, Breyer & Kifmann, 2009)
(ii) (6 points): Suppose quantity demanded of organs (e.g. kidney) goes up with price. Can
you think of a reason why demand for organs would defy the Law of demand? If organ was
available in a free market, how would the shortage be reflected in a supply-demand
framework, where demand for an organ is upward sloping? Explain using an appropriately
labeled diagram.
Can you think of a reason why demand for organs would defy the Law of demand?
The law of demand states that the quantity demanded for a good or service rises as the price
falls, this law is an inverse relationship between price and quantity demanded. It is rare that
these laws of demand is violated but there are extreme cases and can be difficult to prove but
there are reasons as to why this law is defied.

This case happens if the high demand is for a quantity they cannot supply, that is, a capacity
shortage. This case of organ shortage can make the demand go up as a few organs are being
sought after by many individuals. In this case the numbers of people after organs should be
high and the supply of organs should be small for this case to take apply (Blau, Ferber &
Winkler, 2013).
In the case that the substitutes available i.e. dialysis are more expensive than transplants in
the long run then demand for organs will keep on rising despite the increases in prices of
these organs. If the rise in price is still below that of substitutes then such a scenario can take
place where the law of demand is defied (Zweifel, Breyer & Kifmann, 2009).
In situations where there are no substitutes in the case of a disease then demand for organs
can defy the law of demand, that is, the demand for organs will increase if the price
increases. If substitutes are not available then options are limited and patients are subjected to
one product which makes it possible for this law to be defied.
Demand elasticity
If organ was available in a free market, how would the shortage be reflected in a
supply-demand framework, where demand for an organ is upward sloping?
Most consumers prefer to pay low prices for goods and services, this holds in the case where
the law of demand is upheld. The demand curve on a graph in this case slopes downward and
to the right to show a rise in the demand as prices decline.
This law of demand has loopholes where in a few cases the demand of a product increases
with increase in prices, where the demand curve would slope upwards. There are two reasons

as to why such a graph would have a demand curve that has an upward-sloping which are;
conspicuous consumption and products known as giffen goods.
Figure 2: Price and demand
(Fuchs, 2011)
(iii) (2 points): Continuing with this hypothetical case (of a market for organs), do you
expect the market demand curve for organs to be price elastic or price inelastic? What
about the supply curves? Explain why. (Draw the supply and demand curves in part (ii)
keeping in mind these elasticity)
The market demand curve for organs will be price elastic. In a free market, the law of
demand and supply are allowed to operate freely. It is also characterized by many suppliers
of organs and many buyers. Because there are many suppliers of the organs, the price of the
organs will indirectly affect the demand, such that a supplier whose organs are expensive
may face low demand. A price elastic demand is where the demand changes when the price
fluctuates (Eggleston et al, 2008).
On the other hand, the supply curve would be price elastic also. The suppliers would sell
more organs if the price goes up and will be willing to supply less if prices go down.

Therefore, in a free market, which is also a perfect market, the demand and supply curve are
price elastic.
Figure 3: Supply and demand
(de Bekker‐Grob, Ryan & Gerard, 2012)
b) (8 points): “We should allow a market for human organs where purchase and sale of
organs for transplant surgery can be conducted just like any other economic goods.” Do
you agree or disagree? Justify your stance from an ethical point of view or an efficiency
point of view.
Allowing a market for human organs where the purchase and the sale of organs for transplant
can be conducted like any other good is important but with a regulated organ market. The
need to have this regulated market in operation is important for the following reasons:
Legislation that favours this kind of market will be helpful in reducing the abuses of the black
market for human organs (Magee & Hale, 2012). Legislations that have prohibited this
market for a long time should be changed to favour this regulated market to reduce these kind
of inhuman treatment of people in the hunt for organs.

These regulated markets will help sort out the problem of organ shortage, this way most of
deaths that come as a result of organ crisis will be avoided by putting in place laws that allow
for a regulated market.
The regulated market places will have-through legislation-standards that meet the medical
tests. This will reduce the many cases of patients being implanted by infected organs which
would otherwise lead to other ailments or organ dysfunctions.
The regulated markets will also do away with the black markets that deal with human organs
which go against human rights and also do away with the moral commitments. These
regulated markets will have all issues of moral aspect incorporated and codes of conduct
within these markets kept at high standards (Kamat et al, 2014).
These regulated markets will allow for compensation to the donors, this is to cover for the
reciprocating aspect that lacks in the current way of having donors sell or give out their organ
for transplant.
Figure 4: Supply and demand curve
(Kung & Mrazek, 2005)

Question2 (1200words,20points)
A Hypochondriac in the Grossman model: Hypochondria or ‘illness anxiety disorder’ is a
psychosomatic condition that is the result of an inaccurate perception of the condition of body
or mind despite the absence of an actual medical condition. An individual suffering from
hypochondriasis is known as a hypochondriac. Hypochondriacs become unduly alarmed
about any physical or psychological symptoms they detect, no matter how minor the
symptom may be, and are convinced that they have, or are about to be diagnosed with, a
serious illness.
Imagine an individual in the Grossman model who suddenly develops hypochondriasis.
a)(10 points): How would this affect her optimal level of health? Explain your answer in the
light of the three roles that health plays in the model. Use appropriate diagrams to facilitate
your explanation.
This model sees health in terms of capital and therefore investment in health increases the
stock of health which gives utility and production opportunities. Therefore in this case the
patient will invest more in health as he is scared that is condition is worse and therefore in the
eyes of Grossman model the patient will invest a lot of money in health in order to improve
his health as this model assumes that investment in health improves health in general
(Feldstein, 2012).

Figure 5: Grossman model
(Eichler & Levine, 2009)
Depreciation rate is expected to increase with age and therefore this may push the patient to
invest more in health as the optimal level of health decreases with time. If the patient
increases his or her valuation of healthy days as they age then this partially offsets the
predicted health stock decline.
b)(10 points): Now imagine this hypochondriac suddenly wins a mega jackpot lottery of $1
million, how does this exogenous income shock change decisions about her health status?
The patient is likely to increase his investments in health for better improvement as they are
worried about their health more than normal and therefore this will have a consequence of
improving their health as they increase their stocks of health through investment. In this
model the individuals health is said to improve as there is an increase in the quantity of health
inputs employed. This increase in income will result to the budget constraint shifting
outwards and for this reason welfare increases.

Figure 6: Health economics
(Böckerman & Ilmakunnas, 2009)
The patient may also seek knowledge about technology of health production so as to
assimilate information about health matters from the mass-media and their physician. This
model suggests that when the state of technical knowledge changes then the position of the
production function also changes.
This sudden change in an exogenous income may make the patient to have a judgement
similar to that of a patient who sees a reduction in price of a unit of health inputs. This view
can be represented by moving the budget line outwards from the intercept on the
consumption axis (Wonderling, 2011). The assumption is that the individual did not devote
all of his or her income to consumption before the price reduced; this means that the
individual will put more health inputs to achieve better health.
Question 3(800words,20points)
“The emergency room is always busier on full moon nights”. There has been a reasonably
widespread belief among medical professionals in the last decade that suicide rate rises with
lunar phase.

a) (4 points): Is there any scientific evidence to validate this claim (cite at least two
authentic journal articles).
The emergency room is always busier on full moon nights. Despite many scholars finding
that there is no correlation between phases of the moon and increased visits to healthcare
centers, others found that it really does exist. However, the extent at which emergency rooms
are busy depend on so many factors both environmental, physiological and psychological
factors. In a study involving patients undergoing primary and secondary care, it was found
that the there was no any association between visits to the emergency rooms or healthcare
settings and full moon (Kung & Mrazek, 2005). In another recent empirical study involving
pediatric patients, no correlation was to found to exist between lunar cycle and patients visits
(Kamat, Maniaci, Linares & Lozano, 2014). Therefore, there are no authentic scientific
evidence showing actual relationship between the full moon and health visits. In fact, most
studies supporting this hypothesis are said to have statistical and design flaws (Kung &
Mrazek, 2005).
b) (4 points): If the claim is valid, explain why there might be a higher incidence of
suicide on full moon. If not, what behavioural bias is responsible for such views?
Explain.
It is believed that people like or are more willing to be outside during the full moon. The
reason is that there is more light during the full moon than any other lunar face. The bias is
therefore, in the human thinking. Many people associate their experience with astrological
events. For example, some people may feel it worth to perform a lot of prayers during the full
moon because they may believe that God is closer (Henderson, 2012). When such beliefs has
been traditionally inculcated into others, then it becomes a culture. People who belief in a
lunar effect develop a long-life behavior and will associate events with the phase of the

moon. However, in many instances, such beliefs do not coincide with the actual event. For
instance, someone may think that there is too much and the moon could be full. Only to
realize that it is in another different phase (Caswell, 2012).
Another behavioral bias is that full moon affect the sleep pattern. There could be many
factors that affect sleep and when evaluating such researches which find such a positive
correlation, it is important to consider the health of individuals under investigation. Studies
which find that sleep in children is affected by full moon usually find very little statistical
significant relationship. In addition, the sample is usually small and fails to incorporate
certain health factors (Bosman et al, 2010). However, the changes in the gravity during full
moon can cause behavioral changes. But its impact is different across different people.
Therefore, behavioral bias that full moon affect sleep pattern and mythological-based
behavior of human beings to belief in the lunar cycle have resulted into wrong conclusion on
the relationship between full moon and hospital visits.
c) (4 points): Briefly discuss another example in healthcare where such bias may be
present.
The “sleep patterns” is a behavioral bias used in explaining weight gain. There is a notion
that people who sleep long enough tend to improve their weights. Many people especially
those who feel that they have no weight have relied hugely on sleeping enough (8 hours).
However, even though a change of sleep pattern may improve weight gain, it may also have
negative health impacts (Mara et al, 2010). That is , sleeping patterns cannot also increase
weight in a desired manner and may result into other health complications. Many people
relying on sleeping may extend sleeping to daytimes, hence having very little time to
exercise. Therefore, not all people who sleep enough experience weight gain since weight is a
dependent variable that relies on many health issues.

d) (8 points): What role does “present-bias” play in patients’ health-related (e.g.
lifestyle) choices? Provide an example that has not been already discussed in
class.
The “present-bias” changes the patient’s perception regarding illnesses, thereby affecting the
effectiveness of a clinical therapeutic intervention. For example, the mythology of lack of
sleep resulting from full moon can affect the wellness program design and implementation.
As noted, patients with strong belief about the lunar may fail to go for clinical diagnosis to
find the cause of sleeplessness (Rios, McConnell & Brue, 2013). The reason is that a patient
may have very little knowledge of relationship between sleep and other health issues.
Therefore, by ignoring to go for clinical diagnosis on the basis that lack of sleep is due to full
moon, patient may suffer further complications. In such a case, the health care provider will
have to prepare a unique patient-centered therapeutic program that incorporate such beliefs
(Phelps, 2016). Such beliefs may delay treatment or recovery process. Also, the therapy has
to include various confounding, mediating and moderate variable to explain weight gain
relationship with sleep and educate patients on the same (Magee & Hale, 2012).
In addition, such health bias may lead to poor health management strategies that patients
exercise on their own. Many health management programs that people develop for
themselves greatly rely on the nature of scientific evidence available (Kobelt, 2013). For
instance, if people believe that full moon is associated with workload, they may fail to be
objective in their health management.

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