Question

Which of the following health services provided by hospitals would probably have a price-elastic-demand and why?

[A] proton beam therapy

[B] trauma unit care when there are no other trauma units in the area

[C] chronic disease management when there are several other hospitals in the area providing the same service

[D] PET scans using short half life decay particles that must be flown in from distant reactor facilities

Answer 1

Price elastic demand refers to the situation when demand for a good changes according to the change in price of that good. Here in the health market where cronic disease management when there are several other hospitals in the area providing the same service means there are close substitute of health services avilable in the market and consumers are indifferent of having the service from any of the hospitals unless there is a different in price of the service. Thus here the demand for the service of cronic disease changes according to its price thus the demand is price elastic.