ECO 605 Assignment 1.1: Price Elasticity of a Demand Curve
Introduction
The following table represents the demand schedule for visits to a clinic.
Demand Schedule for Visits to a Clinic
| Out of Pocket Price per Clinic Visit | Number of Clinic Visits |
|---|---|
| 60 | 100 |
| 50 | 200 |
| 40 | 300 |
| 30 | 400 |
| 20 | 500 |
| 10 | 600 |
| 0 | 700 |
Assignment Guidelines
- Use the data table to graph the demand curve for clinic visits. Use Excel to generate the graph. Be sure to provide a title, use proper units, and label the axis.
- Identify what each point on the demand curve represents.
- Using the arc elasticity formula for calculating price elasticity of demand, calculate price elasticity of demand between the first row (60,100) and last row (0,700) of the demand schedule.
Important: For all assignments in this course that require calculations, please be sure to show all the steps used.
Submission
You can either export your Excel graph as an image and embed the image of your graph into a Word document that contains responses to questions 2 and 3 or you can draw your graph, scan it, and upload as a PDF.
All the files that you upload should be named using the following convention: Last name_First name_Assignment_1.1.
Submit your assignment and review full grading criteria on the page.
Demand vs Quantity Demanded
Demand refers to the drive or motivation of people to buy goods or services in varying quantities at given prices. Quantity demanded refers to the specific inclination for a specific good and service at a specified price. In healthcare, there are many goods and services, such as physician care, and the willingness of consumers to see their healthcare provider at a given out of pocket price is described in the demand hypothesis (Hicks, 2021). This along with other factors described below will determine the willingness of the consumer to seek out services at set prices.
Several factors will determine the demand for a good. In healthcare, income, cost of commensurate services, predilections, and expectations can change the demand for a product (Hicks, 2021). Each factor will have a different, yet profound impact on the demand in healthcare for a given consumer. The perceived cost of healthcare services to the consumer can directly relate to their demand of services, which is why many patients will look at multiple locations for the same service (Kobayashi et al., 2019).
For this assignment, elective plastic surgery will serve as the service. Income will determine if a consumer seeks the advice and counsel of a trusted and respected professional or if they try to ‘shop around’ for a better price which might be a sacrifice in quality. Alternative services at lower cost facilities or a payment plan that fits into a budget of a consumer can also influence preferences (Prager, 2020). In primary care, the trend of going out of state for plastic surgery has increased over the past few years. Often offices who offer a price list for out-of-pocket expenses will attract those without insurance because of their transparency (Kobayashi et al., 2019). Wants or preferences can impact demand for elective services. These can be impacted by race, gender, healthcare perceptions, background, education, and health status (Hicks, 2021). Some consumers seek out surgeons who went to elite schools, have prestigious locations, or are willing to operate on suboptimal patients. Expectations can also drive elective procedure demand, in multiple ways. Clients might have an image or perception of how they will look after a procedure and what it will do for their lives. Advertising and word of mouth can impact these factors as bad reviews can taint the image of a reputable surgeon. Similarly, a rave review can elevate the image of a relatively unknown doctor. In terms of elective procedures, the factors listed in the Hicks (2019) text can have a profound impact on demand as discussed above.
References
Hicks, L. (2021). Economics of health and medical care. Jones & Bartlett Publishers.
Kobayashi, D., Goto, R., & Tsugawa, Y. (2019). Impact of improved price transparency on patients’ demand of healthcare services. Social science & medicine, 235, 112390.
Prager, E. (2020). Healthcare Demand under Simple Prices: Evidence from Tiered Hospital Networks. American Economic Journal: Applied Economics, 12(4), 196-223.
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