Question

How does each of the Determinants of Price Elasticity of Demand affect such?

Would or would it not affect Medical care and hospitalization demand for the good or service?

Answer 1

Determinants of price elasticity of demand are-

A. Substitutes- The greater the number of substitutes of a product, the higher the elasticity is.

B. Income of the buyer-Higher the income, lower the elasticity of demand because the consumer is not bother with the price much.

C. Nature of the good- The elasticity of demand for luxury goods are elastic and inelastic for necessity goods.

D. Time- The more the time consumers take to respond to price change, the more elastic the demand is.

E. Proportion of income spent- The goods on which higher % of income is spent has elastic demand.

Medical care and hospitalisation are necessities, services whose consumption can't be delayed or avoided. Therefore, they have inelastic demand .