Question

Emergency room health care tends to have a demand curve that is very steeply sloped, while elective surgery does not. Why? Also, health care insurance and vacation spending tend to have a negative cross price elasticity of demand for many people. Why?

Answer 1

a) Emergency rooms tend to have steeply sloped demand curve because the quantity demanded is less affected by the change in prices. Emergency is a situation where action needs to be taken without a delay since each minute is crucial for the patient in emergency. Matters related to prices or money are considered secondary and less important compared to a life. Hence the demand curve is steeply sloped because the demand would change less in such a case .

Whereas the demand in case of elective surgery is less steep because it would be planned before hand and would be a luxury ie the cost would be higher so people tend to be pre prepared for it and hence the demand would change according to the price.

b) There could be several reasons for it.

First if the people tend to spend more on health ie by buying health care insurance, then it implies that they are more concerned about their health and would not want to spend on vacations where more germs or illness could affecr them. So they would try and avoid vacations especially places where the climate is far different from their native country .

Another reason could be that when they tend to spend more on health insurance , less money is left for other goods especially a luxury like a vacation and hence less of vacations are their when the health care insurance increases.

(You can comment for doubts )