Demand and Elasticity in Health Care

Write the formula for price elasticity of demand and describe what it means

The formula that should be used whenever calculating the price elasticity of demand is presented below. According to this formula, Q0 is the demanded quantity (initial) at the time when the price is P0 (or unchanged). The presented Q1 is the quantity demanded (new) after the existing price changes to P1 after some time.


From this equation, it should be observed that the value of ŋ is always negative. This is something caused by the inverse proportion or relationship between quantity demanded and price (Doi, Ide, Tukeuchi, Fujita, & Takabayashi, 2017). An increase in price will always trigger a reduction in the number of goods or services demanded (and vice-versa).

How would you expect the price elasticity of demand for health care to vary with health status?

The concept of price elasticity of demand is applicable in the healthcare sector. This means that the price elasticity of demand will vary significantly depending on a population’s health condition. For instance, when the health status of a particular person or population is high, the quantity (or nature) of demanded services will be quite low. This means that the price elasticity of demand will below. On the other hand, a population with a low health status will be in need of diverse medical services (Hicks, 2012). As the quantity of demanded medical services increases, chances are high that the price elasticity of demand will stretch further.

Would the demand for health care increase or decrease with an improvement in educational attainment in the community?

Studies have revealed that education attainment is one of the drivers of positive health behaviors and outcomes (Hicks, 2012). Individuals who acquire adequate knowledge and education will engage in preventative measures, thereby protecting themselves from diseases such as cholera, HIV/AIDS, and malaria. Consequently, the demand for health care will decrease significantly. These individuals will also be screened regularly to monitor or get rid of dangerous conditions such as cancer, stroke, hypertension, and cardiovascular diseases. This knowledge explains why many countries and governments focus on improvement in education accomplishment as a powerful approach for dealing with healthcare challenges.

Studies using macroeconomic data indicate higher income elasticity for health care. Does that make health care an inferior, normal, or superior good? Explain

Studies completed using macroeconomic data have revealed that health care has high-income elasticity. This revelation shows that health care is a superior good. This is the case because individuals who receive competitive salaries will be able to purchase quality health services. They will also get appropriate medical insurance cover. On the other hand, people who have low income will not receive quality medical services or care. This means that a positive (or high) income elasticity will be recorded whenever focusing on the quantity and quality of demanded medical services (Doi et al., 2017). This knowledge should empower doctors and healthcare providers to improve the quality of health care and support the needs of more people.

Describe the components of time cost in health care. Is time less costly for patients with higher wage rates? Explain

There are major components of time cost within the health care sector. To begin with, Hicks (2012) defines “time cost” as the period consumed by a specific activity. The first component is appointment time. The second is the period taken when traveling to a medical facility. Insurance is another time cost component since it dictates a person’s desirable medical provider and support. Wages can be described as a time cost component. This is true because time will be costly for individuals with higher wages. Such persons will have increased opportunity cost of time whenever seeking various health services and insurance covers. This argument explains why the issue of time should be taken seriously to increase the quality of medical services available to every citizen.


Doi, S., Ide, H., Tukeuchi, K., Fujita, S., & Takabayashi, K. (2017). Estimation and evaluation of future demand and supply of healthcare services based on a patient access area model. International Journal of Environmental Research and Public Health, 14, 1367-1381. Web.

Hicks, L. (2012). Economics of health and medical care (6th ed.). Burlington, MA: Jones & Bartlett Learning.