Demand and Elasticity in Healthcare - Assignment Example

Demand and Elasti in Healthcare Number: The Formula for Price Elasti of Demand and WhatIt Means The responsiveness of consumers or the market to adjustments in the price of a commodity is normally measured using the price elasticity of demand. Since the coefficient of -3 stands for a 300% fall in the total quantity that has been demanded of 100% price increase, the coefficient of -3 is taken to be higher than -.1, when referring to the degree of elasticity. This is because the co-efficient of -0.1 stands for a 10% decrease in the total quantity that has been demanded and associated with a 100% price increment (Dewar, 2010). Thus, the formula that is used to determine the price elasticity of demand is: Percentage change in the quantity of healthcare services demanded Percentage change in the prices of healthcare services Generally, it is a rule that services or goods that are closely substitutable to each other should have higher price elasticity. Complementary goods or services on the other hand possess lower price elasticity. The meaning of price elasticity of demand is that the demand elasticity for any product (healthcare goods and services) which makes up higher proportions of income also remains generally optimal due to the increase in the price of the commodity which curtails further consumption expenditures on other products. 2) How the Price Elasticity of Demand for Health Care Is To Vary With Health Status Given that the elasticity of demand refers to a measure of responsiveness that consumers exhibit towards a given product demand as a result of adjustments in the price of these commodities, it must also be true that price elasticity of demand for healthcare services must coincide with health status. This means that health status becomes useful when studying price elasticity of demand. By looking at price elasticity of demand in light of health status, one is able to focus on absolute magnitude of changes, instead of the relative ones. One of the reasons why price elasticity of demand and health status relate is because healthcare is only valued to the extent it betters health. Likewise, it is an obvious fact that the demand for healthcare heavily depends on income, education, health status and age. Despite the demand for healthcare being ultrasensitive to income and prices, the value of price elasticities have values that range from 0 to -1. Likewise, the degree of utilization of healthcare services is shown to be not only tied to income, but also to be very good at the individual level of response (Dewar, 2010). Giving respect to the relationship between price elasticity of demand for health care and health status on the other hand helps in making comparisons on different demand responses across different individuals, countries and products. 3) Whether the Demand for Healthcare Increases or Decreases With an Improvement in Educational Attainment in the Community It is most probable that increase in educational attainment in the community will increase the demand for healthcare services. This is because this attainment is likely to raise awareness on the importance of public or general health. Public health awareness in turn is poised to entrench the culture of seeking medical attention, not just when malaise begins to set in, but most importantly, for checkups. With a higher intra-community educational attainment, the need for speedy intervention when symptoms persist is likely to be emphasized and widely taught. This is likely to overrule the culture of waiting for the overwhelming by excruciating pain that emanates from an illness before one resorts to medical attention. The most fundamental element that is likely to overthrow this negative culture is the emphasis that health is an economic value, whose worth exceeds monetary capital. Resultantly, it will begin to make sense to the public that the money in the bank is subservient to personal health and should thus be used whenever any physical or physiological anomaly strikes. Conversely, increased attainment in education is bound to counsel the society against the dangers of self medication. Misdiagnosis, poisoning and the buildup of resistance to drugs are some of the dangers that are likely to turn the community from self medication to professional attention. The same education is bound to drive the public into being wary of the dangers of medical quackery. 4) Studies Using Macroeconomic Data Indicate Higher Income Elasticity for Health Care and Whether the Data Make Healthcare an Inferior, Normal, or Superior Good Studies on macroeconomic data show higher coefficients of income elasticity for healthcare services. Answering whether healthcare services can be described as normal, inferior, or superior has been seen to differ at intrapersonal level. Nevertheless, studies that have been carried out between 1960s and 1990s (and even presently) show that healthcare services in America can be categorize as normal good. This is because, most of these services read income elasticity coefficients that are both positive and also have an r (range) that fall within 0 and -1. Normal goods have positive income elasticity, albeit this elasticity being less than one (Dewar, 2010). The essence of this normal good categorization is that in the event that income increases by a certain percentage, it does so with the quantity of goods or services that have been consumed. Nevertheless, the increase in the quantity of goods or services consumed takes place by a lower percentage than the percentage that is associated with the increase in income. The same macroeconomic data discounts any possibility of the US healthcare being categorized as superior good, given that the percentage increase in the quantity of goods or services consumed is not necessarily greater than any other associated percentage increase in the consumer’s income. 5) Components of Time Cost In Health Care and Whether Time Is Less Costly For Patients with Higher Wage Rates Components of time cost in healthcare include the time taken waiting at the physician’s office, a widened sphere of responsibility and the incurring of significant tradeoffs. Despite scantiness of evidence, observers and researchers advance the idea that time prices are an indispensible value, especially to the high income wage earning patients. This is because, the waiting time that is forfeited when seeing a physician directly affects the demand for healthcare services among this group. This is the case since this group by courtesy of having a high income has a lot of capital at its disposal. This availability of capital is in turn directly proportional to propensity towards entrepreneurship. With people venturing into entrepreneurship, time becomes increasingly scarce. The bottom line is that higher wages translate to a larger endowment with capital. Higher volumes of capital in turn directly invite a wider sphere of responsibility and thereby making time a very scarce essential value. Patients with a wider scope of responsibility always find the waiting time very costly in the sense that it would impede progress in other matters. This inability to work while at the physician’s office therefore exposes these high wage earners to significant tradeoffs. Conversely, out-of-pocket costs that are friendly to consumers have prices rationing the use of medical services. This means that those with lower opportunity cost use healthcare services more than their counterparts with higher opportunity costs. High wage earners fall within the bracket of those with higher opportunity costs. References Dewar, D. M. (2010). Essentials of Health Economics. Boston: Jones and Bartlett Publishers. Print Read More