Share your thoughts on why market-based economics (private competition using supply and demand to reach equilibrium prices) may be inadequate when applied to healthcare in the United States. Some things to consider in drafting your initial post are 1. What do consumers need in order for traditional economics to work for healthcare? 2. How is the “product” of healthcare different than other products? 3. Is buying healthcare similar to buying a car (where supply and demand can be helpful)? Why or why not?
2. Healthcare in general is said to be inelastic when it comes to price elasticity of demand. In other words, if the price of healthcare rises, demand for healthcare does not drop significantly. On the other hand, price elasticity of demand for a particular medical practice or medical product is generally higher — individual medical care is generally said to be elastic. This means that when the price of a particular doctor’s visit, medical procedure, or healthcare product rises, the demand for that doctor, procedure or product drops significantly.
Explain this concept using the information on price elasticity of demand (including the following bullet points: The extent to which substitutes are available. If a consumer can easily switch to another good when the price of the original good rises, then the latter will tend to be more elastic. • The proportion of the consumer’s income spent on the good. Naturally, one would be more price sensitive about big budget items, such as housing, than tiny ones, such as chewing gum. Thus, goods that comprise a greater share of one’s budget tend to have higher elasticities. • The time frame in question. Over time, it’s easier for consumers to find substitutes, so long-term elasticities are higher. If the price of gasoline rises, it is hard for consumers to make quick adjustments; gas is price inelastic. Over time, however, persistent high gas prices can lead consumers to lower their demand by buying more fuel-efficient cars, arranging carpools, or using public transportation.