1. What is the labor market?

A market is a place or service that allows buyers and sellers to exchange goods and services. A market may be a specific place or the exchange of a good or service at many different locations. The market for the services of people is called the labor market. It consists of the demand and supply of labor.

2. Why have health care costs risen so much?

Like all other goods and services, the price of health care is determined by demand and supply. Increases in the demand for health care will cause the price and quantity of health care to rise. Several factors are responsible for this increase in demand: an aging population, the way the U.S. health care system is set up, and new medical technologies.

An increase in the number of elderly people causes the demand for health care to increase because the aged consume four times as much health care per capita as the general population. Medicare and Medicaid further increase the demand by giving many people the ability to get medical care without having to pay for it. New medical technologies increase the number of older people who live and require health care.

3. What is a price ceiling?

A price ceiling occurs when a price is not permitted to rise above a specified amount. If this maximum price is below the equilibrium price, the quantity demanded by consumers at that price will exceed the amount that producers are willing to supply, and a shortage develops. Since the price method cannot be used to allocate the good or service, other methods must be used.

4. What is a price floor?

A price floor occurs when a price is not permitted to fall below a specified amount. If this minimum price is above the equilibrium price, the quantity demanded by consumers at that price will fall short of the amount that producers are willing to supply, and a surplus develops.