Question

Why is it useful to use elasticities to compare the responsiveness of demand to changes in price for different types of health services? Provide an example to explain.

Answer 1

It can be mentioned that elasticities are very useful in understanding the responsiveness of demand who changes in price because in the healthcare sector it is important to identify water necessity and what are luxury Health Care treatment for an individual and in this regardif the quantity demanded decreases less proportionately then the increase in price then it is a necessity good and for example insulin and diabetes treatment can be considered as a necessity good which means it is very important for the people to undergo this treatment as a result of which proper policies can be generated so that people can undergo this treatment at a minimal burden.

However elasticity can be e greater than 1 or the quantity demanded increases more proportionately than the decrease in price and this means this is a luxury healthcare cost and this can be used to charge very high for profit-maximizing level so that fornecessities in healthcare the amount generated as profit in the luxury Health Care treatment can be funded for example skin care for plastic surgery is also one Health Care aspect which is a luxury treatment and for this you can charge high as possible so that profit can be made from it and necessity is can be treated and that is the reason why it is important to understand the responsiveness through elasticity and this can minimise the total healthcare burden both for the people as well as the government