Answer to Question #309039 in Microeconomics for bez

Question

Explain different types of price elasticity of demand for health care.

Answer 1

Health care price elasticity is defined as the percentage change in quantity of medical care demanded divided by the percentage change in price of the same commodity. The price elasticity of demand is determined by the type of service offered. Generally, the demand for healthcare and its products are inelastic since there are no close substitutes for healthcare products. Therefore, there only exist one type of elasticity in healthcare, which is the demand for healthcare is always inelastic because there are few substitute, consumers do not shop around for medical services, and most consumers are also insured, reducing the price sensitivity. The majority of components making up healthcare including healthcare products, medical services, and physicians and doctors performing the services are all inelastic with the value ranging from -0.25 to -0.30.