This is the latest in our series of posts in our series on price theory problems with Professor Bryan Cutsinger. You can see all of Cutsinger’s problems and solutions by subscribing to his EconLog RSS feed.Share your proposed solutions in the comments. Professor Cutsinger will be present in the comments for the next couple of weeks, and we’ll post his proposed solution shortly thereafter. May the graphs be ever in your favor, and long live price theory!
Question: Over the past several decades, the inflation-adjusted price of healthcare has increased. Based on this information alone, can you infer the source of the higher price—lower supply or higher demand? If not, what additional data would you need to determine whether higher prices are being driven by changes in supply or demand?
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