ESSAY: Demand and Elasticity in Healthcare

The purpose of this assignment is to describe economic concepts related to health care.
Respond to each of the following questions (150-200 words each) by applying the economic concepts described in this topic’s assigned readings from The Economics of Health and Medical Care.
Write the formula for price elasticity of demand and describe what it means.
How would you expect the price elasticity of demand for health care to vary with health status?
Would the demand for health care increase or decrease with an improvement in educational attainment in the community?
Studies using macroeconomic data indicate higher income elasticity for health care. Does that make health care an inferior, normal, or superior good? Explain.
Describe the components of time cost in health care. Is time less costly for patients with higher wage rates? Explain.
Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.

ANSWER

Price Elasticity of Demand (PEOD)

Price elasticity of demand denotes a concept in economics that determines the percentage change in quantity purchased or demanded of a product relative to a percentage change in its own price (Dewar, 2017). It can be expressed mathematically using the following expression:

Economists use price elasticity to evaluate how demand and supply change relative to a change in the price of commodities as well as understanding the mechanisms of the real economy. For example, some prices of certain products are very inelastic, which means that demand does not change much-given changes in the price. An example of an inelastic good is gasoline. On the other hand, some goods exhibit a high level of elasticity where a change in their prices may cause a substantial change in their demand. Such commodities are…

Relationship Between Price Elasticity of Demand for Medical Services and Health Status

Price elasticity of demand may vary with an individual’s health status. Studies suggest that healthcare services generally exhibit a moderately low price elasticity of demand. Scholars believe that medical care is price-insensitive in that when a person gets sick, they are not price-conscious. It is, therefore inelastic. The main reason for the inelasticity is that individuals have limited options and they normally rely on the doctor’s advice in obtaining medical care. When a person’s health care status is stable, the medical care price elasticity of demand becomes …

Relationship Between Health Care Needs and Educational Attainment

According to some research, as a community’s educational attainment level increases the demand for medical care also increases. This because educated persons tend to seek preventive medical services. Improving education standards in the community creates health awareness and safety. The society becomes equipped with the necessary health skills and knowledge and at the same time, develop positive attitudes towards healthy living. Educational attainment helps the community to maintain and improve their health, including…

As such, to maintain a healthy lifestyle, individuals will tend to seek medical care that enables the prevention of diseases. For example, the community will participate more in government immunization programs for the prevention of infectious diseases due to health awareness. Also, people would seek medical care against chronic and terminal illnesses such as cancer and heart failures for early diagnosis. As such, there would be an increased demand for initial diagnostic and preventive tests in the community; thus, increasing the need for …

Income Elasticity for Health Care

Research suggests that the demand for medical care services is income elastic. Higher-income elasticity for medical services mean that as an individual income rises, the more they consume medical care services. According to Ringel, Hosek, Vollaard & Mahnovski, (2002), as a person’s or household income increases, their disposable income also increases. As disposable income rises, individuals will seek more superior health services. Ringel et al. (2002) estimates the income elasticity of demand for medical care to be in the range of 0 to 0.2.  The estimates show a positive sign meaning that demand for health care rises as income rises. Further, the positive income elasticity implies that medical care is a normal good, however, the degree of flexibility is reasonably small. Other studies show a higher income elasticity based on long time-series data.

The income elasticity of a commodity or service depends on its characteristics. In general, most health care services are necessity goods meaning their demand is moderately inelastic for example, treatments for a heart attack. On the other hand, services such as cosmetic surgeries are discretionary goods and are income elastic. As such, whether the demand for medical services is elastic or inelastic …