CHAPTER 2 DEMAND FOR HEALTH CARE
CHAPTER 2 DEMAND FOR HEALTH CARE
Standard economic demand curves are downward sloping As price(P)decreases,quantity (Q)demanded increases ▣Example: ■P=3,Q=4 lollipops ■P=$1,Q=8 lollipops P=50.50,Q=9 lollipops Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Standard economic demand curves are downward sloping As price (P) decreases, quantity (Q) demanded increases Example: ◼P=$3, Q=4 lollipops ◼P=$1, Q=8 lollipops ◼P=$0.50, Q=9 lollipops
Elasticity measures the degree of downward-sloping Elastic demand DE a price sensitive: changes in price greatly affect the quantity demanded Inelastic demand D Price insensitive: changes in price do not significantly DE change the quantity demanded Q Quantity of health care Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Elasticity measures the degree of downward-sloping Elastic demand DE price sensitive: changes in price greatly affect the quantity demanded Inelastic demand DI Price insensitive: changes in price do not significantly change the quantity demanded
Does the demand curve for health care slope downward? Are people sensitive to the price of health care? Is demand for vaccines such that... ■P=5100,Q=1,000 ■P=51,Q=1,000 i.e.demand is inelastic? Is demand for band-aids such that... ■P=$100,Q=1 ■P=$1,Q=30 i.e.demand is elastic? If people always obey their doctors,then demand should be inelastic! Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Does the demand curve for health care slope downward? Are people sensitive to the price of health care? Is demand for vaccines such that… ◼ P = $100, Q=1,000 ◼ P = $1, Q=1,000 ◼ i.e. demand is inelastic? Is demand for band-aids such that… ◼ P = $100, Q = 1 ◼ P = $1, Q = 30 ◼ i.e. demand is elastic? If people always obey their doctors, then demand should be inelastic!
Need randomized experiments Randomized experiments: Definition:a study that assigns treatments randomly to different groups of study participants Includes: A control group(no treatment) ■Placebo group Helps generate experimental groups that are statistically similar to each other Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Need randomized experiments Randomized experiments: Definition: a study that assigns treatments randomly to different groups of study participants Includes: ◼A control group (no treatment) ◼Placebo group Helps generate experimental groups that are statistically similar to each other