Question

In vitro fertilization (IVF) is an assisted reproductive technology that is used to treat infertility. What are the likely consequences of each of the following hypothetical policy changes on the markets for IVF? Using separate sets of supply-and-demand graphs in each case, explain the effect of the following events on equilibrium price and quantity of IVF services. Assume competitive markets with an upward-sloping supply and a downward sloping demand.

a. A change in state policies makes it more difficult to adopt children from foster care.

b. A health insurance mandate requires all health insurance plans to cover IVF procedures.

c. States start to require IVF clinics to implement minimum nurse to patient ratios.

d. Another option for infertile individuals is to find a surrogate mother who would be artificially inseminated and then carries the baby to term. What would happen if states decide to make surrogacy arrangements legal?

Answer 1

In each of following graphs, D0 & S0 are initial demand and supply curves intersecting at point A with initial price P0 and quantity Q0.

(a) If adoption is difficult, then demand for fertility services like IVF will increase. Demand curve will shift rightward to D1, intersecting S0 at point B with higher price P1 and higher quantity Q1.

(b) If health insurance plans cover IVF services, demand for IVF will increase. Demand curve will shift rightward to D1, intersecting S0 at point B with higher price P1 and higher quantity Q1.

(c) Implementation of minimum nurse-to-patient ratio will increase the cost for IVF companies, who will lower their supply. Supply curve will shift leftward to S1, intersecting D0 at point B with higher price P1 and lower quantity Q1.

(d) Surrogacy is a substitute for IVF, so legalization of surrogacy will decrease the demand for IVF. Demand curve will shift leftward to D1, intersecting S0 at point B with lower price P1 and lower quantity Q1.