PRICE ELASTICITY IN HEALTHCARE

Price Elasticity in Healthcare

Abstract

In this study we try to explore the concept of “price elasticity” in a holistic context. The main focus of the research is on “price elasticity” and its relation with “healthcare”. The research also analyzes many aspects of “price elasticity” and tries to gauge its effect on “healthcare”. Finally the research describes various factors which are responsible for “price elasticity” and tries to describe the overall effect of “price elasticity” on “healthcare”.

Price Elasticity in Healthcare

Introduction

The term price elasticity assesses the changes in the demand of consumer regarding any product or services it the prices change. Price elasticity is measured as the ratio of the increase percentage of the volume of demand for the product or service to the decline in percentage in the price of the commodity, while keeping other factors neutral. It shows the increase percentage in demand with a decrease in the price of goods by one percent. Demand for most health care providers have a low elasticity, this means that the elasticity is less than unity. Thus, according to Ringel (2002), the price elasticity of demand for hospital care, on average equal to 0.7 (exception - cosmetic surgery), and in many cases, it ranges from 0.2 to 0.7. This means that an increase in prices for medical services will reduce the demand for a lesser extent, compare to the change in demand (on higher demand, approximately 10% of prices will increase).

Discussion and Analysis

A quantitative expression for the elasticity of demand reflects the characteristics of consumer behavior, as it is defined by a set of consumer preferences, income levels of population characteristics of the national character and general economic development. In addition to price, supply and demand impact on non-price factors, demand is determined by the number of buyers (people), middle-income individuals, families, ...