Demand for healthcare services exceeds the available resources leading to waiting lists and delays for treatment
Incentives
Economic agents responding to price signals and act accordingly
Price Signal
Changes in price show how resources should be allocated. A rise in prices increases supply but encourages consumers to switch to a substitute
SIR Price Mechanism
Signalling: Prices adjust to allocate resources
Incentive: How consumers and firms react to signals
Rationing: Excess demand means prices are raised to clear the market
SIR Example
Prices of diamonds increase which is signalled to firms, this motivates firms to supply more, but demand is low so supply is rationed by lowering prices
