Price elasticy of demand of healthcare

Answer Price elasti of demand is used to measure the relationship between the changes in the quantity demanded of a particular product due tochange in its price. In economics the term price elasticity of demand is used to discuss the price sensitivity. Price elasticity of demand is calculated by the following formula (Arnold, 2008): Formula: Price Elasticity of Demand = % Change in Quantity demanded / % Change in Price Price elasticity of demand is used by the businesses to predict the change in demand of the product due to change in price of that product. Price elasticity coefficient ranges from less than 0 to coefficient > 1. As the elasticity coefficient moves from negative to positive domain no response in terms of change in demand will be noticed due to change in price. As the coefficient moves away from zero change in quantity demanded is noticed with change in price. Answer 2: To understand the impact of health status on the price elasticity of demand for health care the understanding should be developed about the different levels of health status. In the case, if the person is in the dying position or has some serious illness that requires special cure then the price factor will not be considered and the price elasticity of demand will be perfectly inelastic. On contrary, the price elasticity for general physician services for routine checkups or prescriptions is relatively elastic. Increase in price of general physician will reduce demand unless necessary otherwise. Hence changes in health care status have varying impact on the price elasticity of demand for health care (Ringel, Hosek, Vollaard, & Mahnovski, 2002). Answer 3: The education has become the necessity for every community to survive sustainably in the continuously changing environment. Education is very much influential in every aspect of life. The education also plays a vital role in the demand of health care in the society. The improvement in the education level of the community will lead the community to get better awareness and knowledge about the health concerns. People will prefer consulting doctors and nutritionist for the specific health related information etc. than self-assessments. It will give the better understanding of healthy food and unhealthy food to the people along with the knowledge of importance of quality food consumption etc. Hence, demand for the health care increases with increase in education level of the community (Feng, Qin, and Yu, n. d). Answer 4: Growth in the income of individual or community increases the demands of community for many goods. Similarly, the impact of increased income on the health care sector is also positive. The demand of the health care will increase with increase in income. Further, this increase in the percentage of demand of health care with increase in income is equal or greater than percentage change in income itself. The demand lies in the elastic zone for this condition. With these factors in effect, the relationship of demand of the health care sector with income makes health care sector normal good with higher income elasticity (Mankiw, 2009). Answer 5: The time is a very important resource for everyone in the universe. Every minute of professionals and students has become very important factor in driving the countries’ economy towards the growth and prosperity. The time that the patient spent in the doctor’s waiting room or travelling to doctor is referred to as time cost component of the health care. This time spending results in an opportunity cost to earning wages otherwise. The opportunity cost of any activity means every other thing (benefit) that is to be given up to get something else. This theory drives the importance of time for the professionals. Therefore, person who earns high wage rate has to forego that higher income in waiting for appointment to doctor or time required for travelling to doctor. Contrastingly, person who earns low wage per hour have to forego comparatively less wage in waiting for the appointment. Hence, time cost component of health care is higher for high wage rate earner than low wage rate earner. According to the American Time Use survey, it has been calculated that the Americans with age 15 and above jointly spent 847 million hours in waiting for the medical services to be given in 2007. Since students are usually low wage earners as compared to professionals; therefore, cost of referred time spent is lower than time spent by professionals in waiting for doctor (Krueger, 2009). References Arnold, R. (2008). Economics. Mason, OH: South-Western Cengage Learning. Feng, J., Qin, B., and Yu, Y. (n. d.). Wealth, education, and demand for medical care: evidence from rural China. Retrieved July 1, 2013, from http://profluming. com/Article/UploadFiles/200703/20070310224414483. pdf Krueger, A. (2009). A hidden cost of health care: Patient time. Retrieved July 1, 2013, from http://economix. blogs. nytimes. com/2009/02/09/a-hidden-cost-of-health-care-patient-time/ Mankiw, G. (2009). Principles of Economics. Mason, OH: South-Western Cengage Learning. Ringel, J. S., Hosek, S. D., Vollaard, B. A., & Mahnovski, S. (2002). The Elasticity of Demand for Health Care. A review of the literature and its application to the military health system (No. MR-1355-OSD). RAND NATIONAL DEFENSE RESEARCH INST SANTA MONICA CA