hen 368 lecture 7 the demand for medical care
DESCRIPTION
Demand for Medical CareTRANSCRIPT
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Health Economics !
Lecture 7 The Demand for Medical
Care
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SPECIAL !
This week only Gall Blatter surgery
50% percent off
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Derived Demand
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Derived Demand
Getting health by buying medical care
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Normal Market
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Normal Market
Medical Market
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Normal Market
Medical Market
Planned
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Normal Market
Medical Market
Planned Yes
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Normal Market
Medical Market
Planned Yes No
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Normal Market
Medical Market
Planned Yes No
Know Price
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Normal Market
Medical Market
Planned Yes No
Know Price Yes
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Normal Market
Medical Market
Planned Yes No
Know Price Yes No
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Normal Market
Medical Market
Planned Yes No
Know Price Yes No
Guarantee
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Normal Market
Medical Market
Planned Yes No
Know Price Yes No
Guarantee Yes
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Normal Market
Medical Market
Planned Yes No
Know Price Yes No
Guarantee Yes No
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Normal Market
Medical Market
Planned Yes No
Know Price Yes No
Guarantee Yes No
Equal Information
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Normal Market
Medical Market
Planned Yes No
Know Price Yes No
Guarantee Yes No
Equal Information Yes
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Normal Market
Medical Market
Planned Yes No
Know Price Yes No
Guarantee Yes No
Equal Information Yes No
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Health
Medical Costs
Large Gain
Diminishing Marginal UtilityHealth and Medical Costs
Small Gain
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The Law of Demand
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The Law of Demand
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The Law of Demand
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The Law of Demand
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The Law of Demand
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The Law of Demand
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The Law of Demand
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The Law of Demand
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The Law of Demand
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Law of Demand !
When price falls quantity demand increases
!
When price increases quantity demanded falls.
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Demand for Medical Care
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Demand for Medical Care out-of-pocket price
income time costs
prices of substitutes and compliments tastes and preferences
physical and mental profile state of health quality of care
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Out-of-Pocket Price
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Out-of-Pocket PriceAfter insurance
Coinsurance Copayments Deductible
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Income
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IncomeHigher income tends to
demand more medical care
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Time Costs
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Time CostsTime to visit medical
provider and the opportunity costs
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Prices of Substitutes and Compliments
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Prices of Substitutes and Compliments
OR !
AND
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Tastes and Preferences
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Tastes and Preferences
Marital Status - less Education - ?
Lifestyle - risky
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Physical and Mental Profile
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Physical and Mental Profile
Gender - women more Race/Ethnicity
Age - older more
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State of Health
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State of Health
Sicker - More Unhealthy - More
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Quality of Care
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Quality of Care
Hard to measure nice office
!
perception is more important than reality
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Market Demand !
Intensive Margin Do you buy more or less when
the price changes !
Extensive Margin Do more or fewer people buy
when the price changes
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Elasticity !
A measure of how much one economic variable
responds to changes in
another economic variable
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Elasticity
Percentage Change in Quantity Demanded Percentage Change in
Price
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Price Elasticity of Demand
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Price Elasticity of Demand
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Price Elasticity of Demand
%%
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Price Elasticity of Demand
%%
QD
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Price Elasticity of Demand
%%
QD
P
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Price Elasticity of Demand
%%
QD
P
Percentage Change in Quantity Demanded
Percentage Change in Price
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Price Elasticity of Demand
1
ElasticInelastic
<1 >1
1. Calculate Elasticity 2. Take Absolute Value 3. Compare to benchmark of 1
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What determines Price Elasticity of
Demand?
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Close Substitutes Passage of Time
Luxuries vs. Necessities Definition of Market
Share of Budget
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Close Substitutes
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Close Substitutes
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Close Substitutes
Elastic >1
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Close Substitutes
Elastic >1
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Close Substitutes
Elastic >1
Inelastic <1
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Passage of Time
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Passage of Time
More Time More Elastic
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Luxuries vs. Necessities
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Luxuries vs. Necessities
Elastic
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Luxuries vs. Necessities
Elastic Inelastic
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Share of the BudgetSmall Large
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Share of the Budget
Inelastic
Small Large
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Share of the Budget
ElasticInelastic
Small Large
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Price Elasticity of Demand
% QD !
% P
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Gallons - Gasoline
Price
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Price
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Price
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Gallons - Gasoline
Price
%rQD %rP
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$2.00
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Gallons - Gasoline
Price
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Close Substitutes Passage of Time
Luxuries vs. Necessities Definition of Market
Share of Budget
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% QD !
% I
Income Elasticity of Demand !
Normal, Inferior, or Luxury?
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Income Elasticity of Demand
0
NormalInferior<0 >1
1
Luxury0 to 1