Explain Arrow’s perspective of healthcare market.

Kenneth Arrow was a renowned economist known for his work on welfare economy and won the Nobel prize for his work. Although, he did not work primarily in healthcare, his 1963 paper titled ‘Uncertainty and the Welfare Economics of Medical Care’ came to be known as one of the fundamental works in healthcare economics. Market equilibrium in Healthcare is achieved where supply and demand in this industry are equal. Compelled by self-interest, consumers in a free goods market will naturally look for the lowest price whereas suppliers will be keen to sell at the highest possible price. Obviously, the healthcare industry cannot behave like the ideal markets. The healthcare is full of market failures, government interventions, as well as market inefficiencies and therefore cannot behavelike a free market. The production function of the supply side of the healthcare equation uses factors such as labor in terms of doctors and other health workers, capital, and in-between inputs. The demand health care equation is highly driven by the price of health care. As for price increases, people demand less. However, this change in price does not affect the demand of health care in cases where one is insured. Demand is relatively inelastic in this industry, when one __________ _____ _______ _______ ___ ________ ______.
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