Question

'The Indian Healthcare is the 4th largest sector, with Hospital and medical devices accounting for 9 1%. af total market. The Indian medica! industry consists ot
large multinationals that have extensive service networks and small to medium enterphses. India's medical technology is emerging like a sunrise sector with
major government focus on +ts development. The sector is expected to touch USD 9.6 billion in the year 2022'.
(a) Identify any two macroeconomic factors that will have a negative impact on the price elasticity of demand for the suppliers in this industry stating the rationale
I0-15 words. (b) is this demand expected to be seasonal? Support your answer with one reason. (c) How will a price ceiling by Govt. on a critical medical
equipment used in treatment of Kidney disorders affect the equipment's demand forecasts? Support your answer with good explanation in 20-25 words.

Answer 1

(a) The reduction in the general income and organizational business tax rate by the government in the country would raise the disposable income and the overall profitability of the healthcare suppliers and medical practinioers such as doctors, hostipals/nursing homes and other medical professionals or personnel. This would consequently reduce the price elasticity of demand of the healthcare suppliers for the medical equipment and healthcare infrastructures due to higher income level as the healthcare suppliers and medical practitioners would become relatively rich. Furthermore, an increase in government subsidies to the healthcare and medical equipment suppliers and companies and higher government spending or expenditure to enhance the business development mainly in the healthcare sector would increase the level of competition in the factor or input market in the medical industry in the country thereby increasing the availability of more substitutes and variety of equipment and infrastructural endowments. Now, the availability of more substitutes in the factor or input market would consequently decrease the price elasticity of demand for the medical and healthcare suppliers in the country.

(b) Now, the demand for the medical equipment and infrastructural facilities could be practically seasonal for the healthcare suppliers considering that incidence of certain diseases can vary seasonally with periodic fluctuations. For example, the extent or overall magnitude of viral and bacterial infections are relatively higher during the winter compared to the other seasons in the year thereby leading to a comparatively higher demand for healthcare and medical services in most of the hospitals and nursing homes. Hence, the demand for medical equipment and inputs might be reasonably higher during the winter compared to the other times of the year which might again change as the incidents or viral and bacterial infections decreases progressively. However, considering the general diseases which can happen at any particular time during the year, the demand for certain healthcare facilities and equipment would remain evidently and practically stable.

(c) A maximum price ceiling enforced by the givernment on the critical medical equipment used to treat kidney disorders would limit the equipment price below the equilibrium point or level in the market leading to a possible shortage of the number of equipment. As at the price ceiling stipulated by the government, the demand of the equipment would exceeded or surpass their overall market supply, it would lead to a shortage in the market. Therefore, a price ceiling or restricting the equipment price below the market equilibrium level would eventually and predictably increase the quantity of demanded of the equipment by the healthcare suppliers in the future as essentially the equipment price goes down from its equilibrium level.