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  1. i) (4 points): Why do you think these shortages exist?

(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 labelled diagram.

(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 elasticities)

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.

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.

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?

Question3(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.

  1. a)(4 points): Is there any scientific evidence to validate this claim (cite at least two authentic journal articles).
  2. 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.
  3. c)(4 points): Briefly discuss another example in healthcare where such bias may be present.
  4. d)(8 points): What role does “present-bias” play in patients’ health-related (e.g. lifestyle) choices? Provide an example .

Reasons for Defying Law of Demand in Organ Market

In case of kidney failure, the two options available for the patients are dialysis and kidney transplant. The latter is expensive and provides a lower quality of life and life expectancy compared to the former. In the given scenario, there has been a tremendous increase in the demand for organ transplants owed to the unhealthy and fast-paced lifestyles of the people (White, et al., 2014). Given the scope of organ donations, especially kidney, there is massive shortage compared to the demand. People are reluctant to donate because of many reasons. One of the reasons could be lack of knowledge about the process and mistrust in the healthcare system. People conform to their conservatism and abstain from donation. The other reasons could be on the basis of ethical grounds. Relatives are unwilling to donate the organs of the diseased even after their pre-given consent and hence, Cadaveric donations are also very low (a, Anteby, & Garip, 2014). Also, the most plausible reason could be the lack of incentive problem. Organ selling is illegal in most of the countries. There is very low amount of compensation given to the donors and hence, they are not motivated to donate.

(ii) 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.

Keeping other things constant, the law of demand states that the demand for organs will decrease with the increase in price and vice versa. As per the question, this is violated which implies that the demand for organs increases with the increase in price. The main reasons responsible for the increased demand could be the lifestyle issues. There is a trend of fast-foods with the hectic schedule of the people. People engage in alcohol and smoking which spoil the lungs, kidney, liver and other organs of the people (Donckier, Lucidi, Gustot, & Moreno, 2014). The probability of organ failure increases. Also responsible could be the ‘peer pressure’ in the workplace which makes people indulge in unhealthy habits like smoking and drinking. This eventually multiplies the number of people with organ failures. Thus, even though the price is increasing, there is a high demand because transplant becomes a necessity after a point.  Although the demand and price are very high, the supply is all the more same and this puts an upward pressure on prices.

Supply-Demand Framework in Free Market for Organs

As mentioned earlier, there exists the incentive problem which can be solved by the free market (Callais & Block, 2017). Free market helps to find a price for the market on the basis of interaction of demand and supply. It will provide a price which will increase the supply in the market. It can be illustrated as follows: 

Here, in the absence of free market, there is organ shortage because of high demand and low supply. The price is constant at P1 and the quantity is Q1. While in case of free market the market forces determine the price P2 and quantity Q2 with the interaction of demand and supply. The equilibrium occurs at E with the upwards sloping demand curve, given situation. Free market has not only solved the incentive problem but has increased both prices and quantity. Donors now have an incentive to supply with the increase in prices (Leidera & Roth, 2010).

(iii) 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.

Given the situation of upwards sloping demand curve, the demand curve will be relatively inelastic. The reason could be the survival instinct. People find organ transplant essential and they will not much concerned with the prices. Quantity will not be changed much with the increased price. There are waitlists for patients for the donation and hence, people are more concerned about the transplant than the money associated with it. In contrast to the demand curve, supply curve will be elastic because free market is the solution to the donors facing incentive problem.

b)“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 ethicalpoint of view or an efficiency point of view.

Free markets are the ones where the demands of the consumers and supply of the suppliers interact. They determine the market price at which the goods will be traded and the quantity that will be demanded at the equilibrium price.

In case of the market of organs, there is very little supply corresponding to the very high demand, in the absence of free market. Patients were added to the waitlist and had to wait years for their transplant. The cost of dialysis in the long-run is very high. People often died before they were selected for the transplant.

Price Elasticity of Demand and Supply Curves for Organs

With the advent of free market the problem can be solved. Free market results in efficient allocation of organs. The price increase solves the problem of incentive and the number of donors increase. The quantity of organs in the market will increase. There is opportunity cost to the donors associated in case of free market. People will now donate more. The organs will be allocated efficiently and more donations will be made. Eventually more lives will be saved who otherwise have been dead with no donor available. Free market increases the benefit to the society. People who have money can find a donor easily and can save their lives. The efficient outcome will benefit not only the patients but the donors as well. They will receive good compensation for the donation made.

The people will be motivated to donate and gain from the same. There will be overall increase in the organs in the market. Even if at first, the people desist from live donations of kidneys, there will be increase in organs because of increased cadaveric donations. On the other hand, donors will have an incentive to look after their health and have a healthy life. They will be encouraged to eat healthy, exercise and avoid unhealthy habits.

Imagine an individual in the Grossman model who suddenly develops hypochondriasis.

a) 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.

A hypochondriac person obsesses about his health. He looks for small symptoms and after his self-diagnosis, makes it into a big disorder (Taylor & Asmundson, 2012). They are unlikely to consult a doctor and draw references. Their interaction with the other people makes them curious about their symptoms and heightens the situation. The new generation hypochondriacs rely majorly on the internet to diagnose their issues and draw conclusions (Brain, 2011). They browse their symptoms and relate them to some complex diseases. Internet however is not reliable because of lack of expertise and customisation compared to a doctor who has gained high level knowledge and experience. They over-stress and depress themselves unnecessary wondering about their health (Williams, McManus, Muse, & Williams, 2011). The physical ability, energy and the time are also compromised in the process. At the time of purchase of medical treatment, consumers purchase good health rather than the services.

Debating the Ethical and Efficiency Implications of a Free Market in Organs

Grossman model of health is based on the assumption of farsightedness and optimising decision making about the probable future consequences. Model assumes that the individual makes decisions about what to invest in health capital on the basis of the cost and benefits associated over the time (Laporte, 2015). Roles played by health in the Grossman model are:

Health as capital good: Health can be referred to as a capital good because health can be build up by investing in it. If there is good investment then the results will be good. On the other hand, health depreciates with the time. The investment is essential because health impacts the income of the individual. Capital stock of health inherited depreciates with the time (Fu, Noguchi, & Suga, 2016). The consumer attempts to maximise his health with the given level of monetary income (Fayissa & Traian, 2011).

A hypochondriac utilises his energy and time on the self-diagnoses and neither consults a doctor nor exercises much. His capital stock of health depreciates with anxiety. His income is also affected due to the health.

Health as commodity: Health as a commodity cannot be developed instantly. It can be acquired over a period of time. People can increase their health capital stock over the time. Health stock does not deplete with the common cold, flu or any other serious health issue, despite the loss of immediate utility level. It is the utility person achieves by being healthier (Galamaa & Kapteyn, 2011).

Hypochondriac individual reduces the pleasure and contentment derived from the healthy lifestyle. The stress and anxiety depletes their long term mental as well as physical health. Also, there are emotional complications attached with the hypochondriacs.


Health as production process input: Health is attained over the time by the consumption of medical care and facilities. It is also acquired by the intake of balanced and healthy diet along with other goods and physical activities.

In his model, health inputs act as investments that influence δ, which is the rate of depreciation of the health stock. Health in production function is in the form of an investment (Galama & Kippersluis, 2013). Production function of health is responsible to enable an individual to work to his fullest capacity. It is mainly responsible for the time allocated for market and non-market activities to improve upon the health.

In case of a hypochondriac, the health is compromised in the production function. He trades-off his present health for the future health outcomes and wastes his productivity. He is involved in the self-diagnose and rely heavily on his personal judgment and public opinions rather than consulting a doctor. The present anxiety and depression has future implications on health. Health is also deteriorated by the consumption of unnecessary medicines.

b) Now imagine this hypochondriac suddenly wins a mega jackpot lottery of $1 million. Howdoes this exogenous income shock change decisions about her health status?

A hypochondriac is preoccupied with the panic and distress of suffering from a severe disease because of the misapprehension of somatic symptoms. Hypochondriasis has repulsive and chronic symptoms. It can not only last for months but years despite having the medical support of no underlying illness. They account symptoms for physical illness but not mental or any other illness. They are reluctant to visit psychiatrics. This not only has social health concerns attached with it but also the loss of cost efficiency. The first step to hypochondriasis includes bodily sensations which lead to disastrous interpretations. This further leads to anxiety and depression. There is a vicious circle of identification of symptoms, self-diagnosis and home remedies with self-prescribed medicines.

The possibility of winning a jackpot by a hypochondriac has devastating consequences. With the advent of huge sum of money, he has access to wide range of information at his hand. His vicious circle grows stronger and he indulges in more of self-assessment. He now can expose himself to new types of medications and treatments. The money can be the intermediary to the previously non-accessible medicines as many of them require doctor prescriptions. There is also an enormous risk of drug abuse involved with self-medication (National Medicine Information Center and Reference Library (NMICRL); Directorate General, 2014). He can end up purchasing expensive drugs to get out of his anxiety and depression. The intoxication can drag him out of his obsessive involvement in his health. There can be legal complications involved with the same. There is a possibility of addiction of the costly drugs.

Since the hypochondriac has a lot of money, he can trade off his time for work with his health diagnose. He then weighs his health more than his income and job. His working capacity will be lost and he will be drained with the redundant concerns of his health. His main objective will be to improve his physical health at the cost of his job and mental health. This will not be reliable in the long run when all the jackpot money gets used up with the expectation of improving his falling health.

The other complications on one hand can involve focus on symptoms with no serious issue and ignorance of issues arising from hypertension and anxiety. Also, the medicines that the person will take might have side effects. There could be serious complications to this. The person might develop allergies, kidney and liver dysfunction, stomach issues, cardiac infarction, aortic stenosis, urinary retention and many others (Yamanishi, Pauwels, & Kotera, 2012).

Also, the immune system of the person is affects with the excessive intake of medicines. He will be used to taking medicines such that at the time of actual disease the medicines might not work. Then he will have to resort to other medicines which will hamper his organs and immune system. He will try other treatments and streams of alternative medicines which might react or not provide the desired results when combined with alternative medicines.


Eventually the individually fall short of money and health. All his time and money allocate to his health will be wasted.

 All this will make him more sensitive towards his health. He will devote his maximum time, energy and money in the health assessment. He will not have second thoughts about any expensive treatment and will be affluent. The end results will not be improved health but its deterioration and increased anxiety and depression. There will be eventual loss of energy, time, and money. There will be fall in his productive value in the economy.

  1. a) Is there any scientific evidence to validate this claim (cite at least two authentic journal articles).

People often inculcate and evolve myths in other people which spreads exponentially. One of the famous myths involves the lunar eclipse and the human behavior. Moon seems to increase insanity, suicides lunacy, homicides, epilepsy, chances of baby delivery and many others. Some people believe to have increased number of patients on the night of full moon while the vast majority contradicts to the same. There was no relation found in the human health behavior and full moon. No scientific evidence was found for the same (Roy, Biswas, & Roy, 2015). During a five year study on 9,967 admissions to the emergency department had lesser patients on full-moon night compared to any other night (Parmar, et al., Effects of Full-Moon Definition on Psychiatric Emergency, 2014). There were lesser cases of mental illness found on the full-moon night. There was no evidence found in the other studies and researches. Suicides, homicides and issues had no link with the lunar cycle.

  1. b) If the claim is valid, explain why there might be a higher incidence of suicide on full moon. If not, what behavioral bias is responsible for such views? Explain.

The main reason behind the issue is the conservative thinking of the people. They are reluctant to adapt to the new researches and often inculcate their beliefs and myths in their successors. Often these myths are overblown during the process of transfer of information. There is time discounting bias involved here. There are researchers in favor of the relationship strengthen the myth in the minds of the people and are responsible for the confirmation bias (Layton, 2018). These researches help people justify their myths. They rely on the few who believe in the myth and ignore the finding of the many others. The other reason could be the development of causality illusions. Often, people may develop the causality illusions among their minds. They develop a hypothetical relationship even when there is no direct correlation in actuality (Matute, et al., 2015).  They conceive situations in their minds and conform to them and are not moved by the factual evidences.

  1. c) Briefly discuss another example in healthcare where such bias may be present.

When a person falls sick, they try to take self-prescribed medicines. Often, they consult their friends and relatives before visiting a doctor. They help confirm effectiveness of the home remedies and medicines suggested by the patient. He takes those medicines and has confirmation bias because of friends and relatives. He ends up taking the conforming to the medicines even if they are unreliable or conflicting in the medical terms. This behavior may be proved risky. He has faith and confirmation bias attached here.

There is time discounting bias involved in case when a surgery is involved but people rely on treatment through medicines and drugs. They trade off future surgery in the favor of present convenience. They are convinced that medicines will solve the issue and postpone the surgery. Although there is a need for surgery in the long-run, they depend on the medication.

d) What role does “present-bias” play in patients’ health-related (e.g. lifestyle) choices? Provide an example.

Present bias pays greater pay off to present (with low value of reward) and lesser pay off to future (with high value of reward). There is a bargain in favor of present value than the future value (Chakraborty, 2016). Present bias can be owed to the self-control issues (Delaney & Lades, 2015). It is the reason why people prefer the present reward to the future ones. The inter-temporal trade off attaches present pleasures a greater value. Enduring people engage in healthy habits and lifestyle while the ones with low endurance engage in unhealthy behaviors. The former are concerned about their future health while the latter ones discount the future with felicity (Kang, 2015). The degree of impatience can be characterized as discounting rates and thus the pay-offs are allocated by different individuals to different strategies and choices.


A person with endurance will engage in healthy habits. He will consume healthy food and avoid the harmful ones. He will abstain from habits of drinking. Neither will he engage in smoking nor drugs. His main focus is to have a healthy future life which can only be generated through years of healthy rating and living. He will also engage in various physical activities and sports to keep his muscle working. This will not only strengthen his muscles and tone his body, but also improves the functioning of the internal organs. There is a greater possibility of his healthy and long survival.

A person with lower endurance level will conform to his greed and feelings to satisfy his present wants. He will stick to tasty and delicious food which is dangerous in the long-run. Oily and fattening foods may develop into cholesterol and cardiac arrests. The person will be obese with low levels of stamina. He will prefer to relax instead of doing any form of activity. There will be many issues arising because of unhealthy food eating habits. He will rely on fast food and packed stuff which contain preservatives and spoil his health. Also, he will engage in alcohol and smoking habits. It will result in kidney and liver failure. He will avoid exercising and any other form of physical activity. He will have many doctor appointments along with a long list of medications and treatments.

References 

a, A. L., Anteby, M., & Garip, F. (2014, January 24). Who donates their bodies to science? The combined role of gender and migration status among California whole-body donors. Social Science & Medicine, 106, 53-58. Retrieved April 06, 2018, from https://pdfs.semanticscholar.org/c5c2/f306a71c2ee1feac33f56f89e2745ff5043d.pdf

Brain. (2011). Hypochondria: medical condition, creative malady. Brain: A Journal of Neurology, 134, 1244–1249. Retrieved April 06, 2018, from https://academic.oup.com/brain/article-pdf/134/4/1244/974212/awr006.pdf

Callais, J., & Block, W. E. (2017). Medical Economics: Legalize Organ Markets. Medical Economics: Legalize Organ Markets, 18(02), 73-81. Retrieved April 06, 2018, from journal.binus.ac.id/index.php/winners/article/download/4222/3259

Chakraborty, A. (2016, November 21). Present Bias. Retrieved April 06, 2018, from https://www.isid.ac.in/~epu/acegd2016/papers/AnujitChakraborty.pdf

Delaney, L., & Lades, L. K. (2015, July 28). Present Bias and Everyday Self-Control Failures. Stirling Economics Discussion Paper 2015-01. Retrieved April 06, 2018, from https://www.stir.ac.uk/media/schools/management/documents/workingpapers/SEDP-2015-01-Delaney-Lades.pdf

Donckier, V., Lucidi, V., Gustot, T., & Moreno, C. (2014, April). Ethical considerations regarding early liver transplantation in patients with severe alcoholic hepatitis not responding to medical therapy. Journal of Hepatology, 60(04), 866-871. Retrieved April 06, 2018, from https://www.sciencedirect.com/science/article/pii/S0168827813008167

Fayissa, B., & Traian, A. (2011, July). Estimation of a Health Production Function: Evidence from East-European Countries. The American Economist, 58(02), 134-148. Retrieved April 06, 2018, from https://moodle.adaptland.it/pluginfile.php/20585/.../553c53170cf2c415bb0b2cc0.pdf

Fu, R., Noguchi, H., & Suga, K. (2016, December 10). A Revisit to the Grossman Model with Endogenous Health Depreciation. 36(04), 2405-2412. Retrieved March 31, 2018, from https://www.researchgate.net/publication/311559451_A_Revisit_to_the_Grossman_Model_with_Endogenous_Health_Depreciation

Galama, T. J., & Kippersluis, H. V. (2013, June). Health Inequalities through the Lens of Health Capital Theory: Issues, Solutions, and Future Directions. Health and Inequality, 263-284. Retrieved April 06, 2018, from https://www.rand.org/content/dam/rand/pubs/working_papers/WR1000/WR1011/RAND_WR1011.pdf

Galamaa, T., & Kapteyn, A. (2011, September). Grossman's Missing Health Threshold. Journal of Health Economics, 30(05), 1044-1056. Retrieved March 31, 2018, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3177017/

Kang, M.-I. (2015). Present-biased preference and human health. Quality in Primary Care, 23(06), 345-348. Retrieved April 06, 2018, from https://primarycare.imedpub.com/presentbiased-preference-and-human-healthbehavior-a-mini-review.pdf

Laporte, A. (2015, January 08). Should the Grossman model of investment in health capital retain its iconic status? Canadian Centre for Health Economics, 1-26. Retrieved March 06, 2018, from https://www.canadiancentreforhealtheconomics.ca/wp-content/uploads/2015/01/Laporte-R.pdf

Layton, J. (2018). Why do people believe things that science has proved untrue? Retrieved April 06, 2018, from How Stuff Works: https://science.howstuffworks.com/science-vs-myth/everyday-myths/why-people-believe-things-science-proved-untrue2.htm

Leidera, S., & Roth, A. E. (2010). Kidneys for Sale: Who Disapproves, and Why? American Journal of transplantation, 10(05), 1221–1227. Retrieved March 29, 2018, from https://web.stanford.edu/~alroth/papers/KidneySales%20repugnance%20AJT2010.pdf

Matute, H., Blanco, F., Yarritu, I., Díaz-Lago, M., Vadillo, M. A., & Barberia, I. (2015, July 02). Illusions of causality: how they bias. Frontiers in Psychology, 06. Retrieved April 06, 2018, from https://www.frontiersin.org/articles/10.3389/fpsyg.2015.00888/pdf

National Medicine Information Center and Reference Library (NMICRL); Directorate General. (2014, January). Self-medication. Sudan Journal of Rational Use of Medicine(06). Retrieved April 06, 2018, from https://apps.who.int/medicinedocs/documents/s22205en/s22205en.pdf

Parmar, V. S., Talikowska-Szymczak, E., Downs, E., Szymczak, P., Meiklejohn, E., & Groll, D. (2014, January 12). Effects of Full-Moon Definition on Psychiatric Emergency. ISRN Emergency Medicine. Retrieved April 06, 2018, from downloads.hindawi.com/archive/2014/398791.pdf

Roy, A., Biswas, T., & Roy, A. K. (2015, May 25). A Structured Review of Relation between Full Moon and Different Aspects of Human Health. SM Journal of Biometrics & Biostatistics, 02(01). Retrieved April 06, 2018, from smjournals.com/biometrics-and-biostatistics/download.php?file=fulltext/smjbb...pdf

Taylor, S., & Asmundson, G. J. (2012). Etiology of hypochondriasis: A preliminary behavioral-genetic investigation. International Journal of Genetics and Gene Therapy, 02, 1-5. Retrieved March 30, 2018, from https://pdfs.semanticscholar.org/ce6f/24455f83e7dd68d239e12b9e5afdb43c8520.pdf

White, S. L., Hirth, R., Mahíllo, B., Domínguez-Gil, B., Delmonico, F. L., Noel, L., . . . Leichtman, A. (2014, August 24). The global diffusion of orggan transplantation: trends, drivers and policy implications. Bulletin of the World Health Organization, 92. Retrieved April 06, 2018, from https://www.who.int/bulletin/online_first/blt.14.137653.pdf

Williams, M. J., McManus, F., Muse, K., & Williams, J. M. (2011). Mindfulness-based cognitive therapy for severe health anxiety (hypochondriasis): An interpretative phenomenological analysis of patients’ experiences. British Journal of Clinical Psychology, 50(04), 379-397. Retrieved April 06, 2018, from https://www.radboudcentrumvoormindfulness.nl/media/Artikelen/WilliamsMcManus2011.pdf

Yamanishi, Y., Pauwels, E., & Kotera, M. (2012, November 1). Drug Side-Effect Prediction Based on the Integration of Chemical and Biological Spaces. Journal of Chemical Information and Modeling, 52(12), 3284–3292. Retrieved April 06, 2018, from https://pubs.acs.org/doi/ipdf/10.1021/ci2005548

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