Question

In: Finance

Do demand curves in healthcare, in general, operate in the same was as they do in...

Do demand curves in healthcare, in general, operate in the same was as they do in the retail market.

Solutions

Expert Solution

Demand curve shows the relationship between quantity demanded (in x axis) and prices (in y axis). For a retail market the curve is downward sloping and indicates that when the prices are high then the demand will be low and when the prices are low demand will be high. Thus for a retail market the demand curve shows that an inverse relationship exist between prices and demand.

The demand curve in case of healthcare will not be the same as the curve for a retail market. This is because in case of healthcare the demand for health-care services will be less sensitive to price changes. The sensitivity of demand to price changes will be high in case of retail market but in case of healthcare the sensitivity will be low. This is because in case of emergencies and critical illness like cancer, heart diseases etc. the patient and their families will have to avail the medical treatment irrespective of the prices. Hence the demand curve for healthcare is less steep than the curve for retail market.

We can thus conclude that demand curves in healthcare do not operate in the same was as they do in the retail market and tends to be less steep than the demand curve for retail market. This is because demand in the healthcare is less sensitive to price changes while demand in retail market is more sensitive to price changes.


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