5.2 In Hong Kong, the Accident & Emergency (A&E) departments of public hospitals provide emergency services with a very low price of $100 for each attendance. It has been heavily subsidized by the government. As a result, patients should wait for a long time to see the doctor due to the service is over-demanded. In the meanwhile, private hospitals also provide emergency services and patients can be treated immediately, so the private hospitals are working within the capacity. Assume for simplicity that emergency service fee in private hospital is $1000.

a. Draw supply and demand curves for the emergency services in private and public hospitals. Draw one graph for type of hospitals.

b. Is there a pricing policy that would have filled the capacity of the private hospital?

c. The price system does not work to ration the emergency services in public hospital. How do you know? How do you suppose the tickets were rationed?