Provide an example of demand for health care services or goods that demonstrates the law of demand.
The Aspirin tablets will be purchased by Mr. Hart at the sale price since the law of demand postulates that individuals purchasing power increases as the price decreases. Milk and medicine are necessities, therefore, even if their prices inclines, people still will be forced to purchase them. Besides, if there is no substitute in the market, the consumers will still buy the product since there is no replacement value (Alternative products)
The law of demand always remind us what we already know- that is when the prices go down, the quantity demanded will go up while when it declines the quantity demanded goes up (Mohn,2017).Demand is the measure of the ability and willingness of the customers to purchase goods and services at particular price levels. In the market, there are various factors which impact on demand, and they comprise of the income, diminishing marginal utility, substitution goods, tastes and preferences and complementary goods. It is thus evident that the more the prices of goods and services change in the market, the more the incline of our willingness and ability to buy a product. These shows the manner in which product in question is elastic.
In this example, would you expect demand to be elastic or inelastic? Explain why you think so, and discuss factors that could impact the elasticity or inelasticity of demand based on your understanding of the concepts and this area of health care:
All the consumer products are always guided by the law of the law of demand hence demonstrating the price elasticity of the demand. However, this does not mean that the association between the prices and the demand are equal across all consumer goods. Elasticity is the measure of the percentage change in the quantity concerning the percentage change in the price margin. One of the advantages of elasticity is that it is dimensionless and does not depend on the size of the market or the units of measurements. Elasticity has a direct relationship with the time. The larger the time allowed, the larger the elasticity. In the case where a single competing firm for the same products faces a higher elasticity, it means that the market will respond by consuming this product as opposed to other products in the market.
How would you illustrate rational choice using this example?
In the situation where the product has only one use, the change in the price of one unit will not lead to a subsequent effect on the level of demand, a situation which referred to as an inelastic demand. On the other hand, if the product has numerous usages then a change in the price will have a lot of effect on demand in so many ways. In the situation, the commodity will be put to various uses and hence have an elastic demand. In case the prices of the products increases, the demand for a product will be purposely for an essential use, and in some other uses, the substitute goods will be put into use.
Given that the prices of the Aspirin are elastic, Mr. Hart can then buy it at a given market price levels. However, for the company to boost sales, they are supposed to lower the prices a bit to improve the sales, a process which tends to boost the sales revenue. The elastic demand shows that a 1% incline in the price of the product tends to lead to a more than proportionate change in the quantity demanded. For instance, when the prices increase by 10% units, then the quantity demanded will incline by 20% units. Therefore, in the circumstance where the demand for the product is elastic, the firm should consider to cut prices to boost their revenue levels.
etzen, T. (2013). Health economics and financing (5th ed.). Hoboken, NJ: John Wiley and Sons.
Laureate Education, Inc. (Executive Producer). (2008). Health Economic: Demand for health care.
Mohn, E. (2017). Supply curve. Salem Press Encyclopedia
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