• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Outline the concept of price of elasticity of demand. Discuss ways in which an understanding of these price elasticity concepts would be useful to health care market.

Extracts from this document...

Introduction

Outline the concept of price of elasticity of demand. Discuss ways in which an understanding of these price elasticity concepts would be useful to health care market. (1500 word maximum) Businesses know that they face demand curves, but rarely do they know what these curves look like. Yet sometimes a business needs to have a good idea of what part of a demand curve looks like if it is to make good decisions. If Pepsi Coca raises its prices by ten percent, what will happen to its revenues? The answer depends on how consumers will respond. Will they cut back purchases a little or a lot? This question of how responsive consumers are to price changes involves the economic concept of price elasticity. Therefore the first aim of this essay is to outline the concept of the price elasticity of demand. It will be focused on 3 aspects, first, definition of the price elasticity of demand, second, elastic versus inelastic, and finally some factors influencing the price elasticity of demand will be interpreted. Also in this essay, it will be discussed that the price elasticity of demand in health care market. The price elasticity of demand measures the responsiveness of quantity demanded to change in price, with all other factors held constant. ...read more.

Middle

* Degree of necessity or luxury: luxury products tend to have greater elasticity than necessities. Some products that initially have a low degree of necessity are habit forming and can become "necessities" to some consumers. * Proportion of income required by the item: products requiring a larger portion of the consumer's income tend to have greater elasticity. * Time period considered: elasticity tends to be greater over the long run because consumers have more time to adjust their behavior to price changes. * Permanent or temporary price change: a one-day sale will result in a different response than a permanent price decrease of the same magnitude. * Price points: decreasing the price from $2.00 to $1.99 may result in greater increase in quantity demanded than decreasing it from $1.99 to $1.98. Now to better understand the price elasticity of demand that the demand of health care market is a good example. Individuals make choices about medical care. They decide when to visit a doctor when they feel sick, whether to go ahead with an operation, whether to immunize their children, and how often to have checkups. The process of making such decisions can be complicated, because it may involve accumulating advice from friends, physicians, and others, weighing potential risks and benefits, and foregoing other types of consumption that could be financed with the resources used to purchase medical care. ...read more.

Conclusion

As a result, when the price of care increases, consumers are able to substitute away from preventive care toward other goods and services that promote health such as nutritional supplements and healthy foods. In addition, preventive medical services may be seen more as a luxury than a necessity and, thus, may be put off when the price of such care increases. Further, the opportunity cost of obtaining preventive care is much higher than it is when the patient is sick, particularly if the illness keeps the individual out of work. It is also likely, that since the benefits of preventive care accrue in the long-term, they are heavily discounted. To conclude this essay that the elasticity of demand is a measure of the responsiveness of product demand to changes in one of its determinants. The demand determinants for which elasticity measures are typically computed are the price of the good or service, the income of the consumer, and the prices of related goods or services. Elasticity measures are particularly useful because they focus on the relative magnitudes of changes rather than the absolute. As such, elasticity measures are free of units of measurement. This characteristic makes them particularly useful for comparing demand responses across products, countries, and individuals. Also in this essay, in order to better understand the price elasticity of demand, the health care market has been made as a example in discussed ether it is a inelasticity of elasticity. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Marketing & Research section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Marketing & Research essays

  1. Distinguish between "a change in demand" and "a change in quantity demanded.

    charge less for the same quantity supplied or they will be willing to sell a more of the good for each and every price of the good. For example, lower cost of labour in China and Malaysia allows mobile phone producers to increase their supply by locating their manufacturing plants in these countries.

  2. BTEC BUSINESS UNIT 2

    Because all of the information is stored on the computer it is hard to lose it. Website - A website is a page or multiple pages that are linked together that can be viewed via internet using a computer, this is why it comes under ICT.

  1. For this assignment I have been asked to produce a new marketing strategy for ...

    Sales will fall as newer technically improved or move fashionable ideas appear in the market place. Profit will no longer be made. Profits can be improved by reducing marketing spend and cost cutting. The following table shows How to Measure the Stage of the Product Life Cycle |Stage |No.

  2. "Indifference curve analysis provides a superior explanation of the shape of the demand curve, ...

    If utility decreases after an extra unit is consumed, then it is simple to assume that the person will need an incentive, such as lower price, to consume an extra unit of the good.

  1. unit 2 recruitment in the work place

    Management Styles: Different managers have a different style of managing the business, some could be good but some could be negative impact for the business. There are four main types of management styles: * Autocratic - An autocratic manager dictates orders to their staff and makes decisions without any consultation.

  2. What is meant by price elasticity of demand? How can we measure the elasticity ...

    When the price rises to $6, demand falls to 45 units, and total outlay increases to $27. total outlay has moved in the same direction as the price change - the price increase would lead to an increase in total revenue for firms, therefore demand is said to be relatively inelastic.

  1. I am going to be writing about the concepts of marketing distinctiveness of the ...

    so you have to keep improving products to keep up with the competition. This is exactly what iPod is doing at the moment. Phillips on the other hand was one of those who failed to realise the consequence of these principles as it had created the mp3 player but it

  2. Business studies, product development

    People take a lot more interest in extra compartments for sport e.g. somebody going to a hockey match will want space to put a gum shield, phone, glove, money and deodorant in one space while they have cloths in another and their boots and stick in another.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work