The best way to explain "provider induced demand" for health care services is by giving you an example.

If you have a town with 100 people and 1 doctor, the average utilization of services would be X. But if you were to add another doctor to that town, the utilization of services would increase because of the sole presence of the doctor with the number of residents staying constant ( 100 ).

Provider induced demand is very common - more common than we think or are willing to admit. This is one reason why health care markets are imperfect and why sole "market" based solution is not advisable.

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