Statistics Assignment

Statistics Assignment

Consider the demand for physician visits, a type of health care. A demand schedule (curve) for physician visits shows the relationship between price and quantity demanded during a particular period, all other things being unchanged. Consumers tend to purchase more physician visits at lower prices than at higher prices. This inverse relationship between the price of visits and quantity demanded is known as the law of demand (Folland, 2006).

When assessing the relationship between price and quantity of physician visits demanded, it is important to understand the true price of this service. Consumption of a health care service often requires a considerable amount of waiting and travel time. When the value of time a consumer gives up represents a significant portion of the money price of a health care service, the value of time should be taken into account when calculating the true or full price of that service (Feldstein, 2008).

Health care demand studies focus on the price elasticity, or the percentage change in the quantity demanded resulting from a given percentage change in price. Price elasticity values are negative because prices and quantities demanded move in opposite directions. Health care economists are interested in the magnitude of the response and often refer to these elasticity values in absolute value terms. Price elasticities are affected by the nature of the good or service, the availability of substitutes, and whether the good or service is used alone or in combination with other items (Folland, 2006).

Consumers perceive few substitutes for health care, so their purchases are not very price responsive. Price elasticity values for medical care tend to be in the inelastic range, indicating, for example, that a given percentage increase in price will lead to a smaller percentage decrease in quantity demanded. Information on the responsiveness of consumers to changes ...