In: Economics
You have just been put in charge of estimating the demand for hospital services in a major U.S. city. What economic and noneconomic variables would you include in your analysis? Justify why each variable should be included in the study, and explain how a change in each variable would likely affect the overall demand for hospital services.
I would include the following variables:
Variable 1: Average income of the population
Justification: Income of people is directly related to the healthcare services demanded by the general population. With a rise in income, people demand higher healthcare services. So, higher the income, higher will be the demand for healthcare services.
Variable 2: Average age of population
Justification: Higher the average age of the population, higher will be the demand for healthcare services. With a rise in age, people tend to demand more healthcare services.
Variable 3: Environmental factors
Justification: Environmental factors such as air quality, water quality, etc. makes a difference in the overall health status of the population. The healthier the environment is, the less will be the demand for healthcare services.
Variable 4: Size of population
Explanation: Population size directly affects the number of healthcare services required. The higher the population, the higher will be the demand for healthcare services.