You just started working as a Health Service Manager within one of the following health care industries. First choose an industry below to discuss the questions that follow:
- Ambulatory Surgery center
- Physician’s Office
- Cosmetic Surgery Center
- Laser Eye Center
- Dental Office
Your boss has asked you to write a report detailing how the demand for your product(s) is impacted by various economic factors. In writing your memo, be sure to include your name and in the subject line identify the health care entity you chose above. In order for your boss to easily review your memo, please include section headers to correspond to the questions below.
Answer the following questions relying primarily on the course readings and other resource material presented in this class (do not cite any other outside sources).
- Describe a product or service your company provides to your patients
- Evaluate the demand curve for your product and relationship between the price of your service/product and the quantity demanded.
In this evaluation, be sure to identify:
- whether demand is sensitive (e.g. elastic) or less sensitive (e.g. inelastic) to changes in the price and
- evaluate why this relationship might occur.
- include a discussion of how the existence of health insurance would impact the elasticity of demand.
- Define “substitute” goods and identify potential substitutes for your product/service. Evaluate how does the existence of a substitute impact the demand for your product/service.
- Define “complement” goods and identify potential complements for your product/service. Evaluate how does the existence of complement goods impact the demand for your product/service.
- Identify and discuss the economic factors that might lead to a shift in the demand curve for your product/service?
Expert Solution Preview
The healthcare industry plays a crucial role in providing medical care and treatments to patients. As a medical professor responsible for creating college assignments and answers for medical college students, I have been asked to address various economic factors that impact the demand for products or services in different healthcare industries. In this answer, I will address the questions related to the economic factors impacting the demand for services in a Laser Eye Center.
1. Describe a product or service your company provides to your patients:
The Laser Eye Center provides corrective laser eye surgeries to patients suffering from myopia, hyperopia, and astigmatism. The center uses advanced technology and surgical procedures to correct vision problems and improve patients’ quality of life.
2. Evaluate the demand curve for your product and relationship between the price of your service/product and the quantity demanded:
The demand curve for laser eye surgery is relatively elastic, meaning that changes in price significantly impact the quantity demanded by patients. The demand elasticity is influenced by the availability of substitute treatments and complements to the service. As the price of laser eye surgery increases, patients are likely to consider other vision correction options such as eyeglasses, contact lenses, or even no treatment. However, the demand for laser eye surgery may remain stable if technological advancements and unique experiences justify the high prices.
Health insurance is also an important factor that affects the elasticity of demand. Patients with comprehensive insurance plans may be less sensitive to price changes since their insurance coverage will pay for a certain amount of the procedure cost. Therefore, the insurance can encourage patients to seek laser eye surgery, even if they might not otherwise be able to afford it.
3. Define “substitute” goods and identify potential substitutes for your product/service. Evaluate how the existence of a substitute impacts the demand for your product/service:
Substitute goods refer to alternative products or services that can fulfill the same needs or wants of customers. Potential substitutes for laser eye surgery include eyeglasses, contact lenses, and alternative refractive surgery procedures such as photorefractive keratectomy (PRK). The presence of substitutes can decrease the demand for laser eye surgery since customers can achieve similar results at a lower cost. However, technological advancement and safer procedures can justify the higher cost of laser eye surgery and increase its demand.
4. Define “complement” goods and identify potential complements for your product/service. Evaluate how the existence of complement goods impacts the demand for your product/service:
Complement goods refer to products or services that are consumed together to fulfill a need or want of customers. Potential complements for laser eye surgery include eye examinations, pre-operative and post-operative treatments, and follow-up care. The existence of complement goods has a positive impact on the demand for laser eye surgery since patients require them to order to yield the full benefits of the procedure. The convenience of receiving all the services in one center can also increase the demand for laser eye surgery.
5. Identify and discuss the economic factors that might lead to a shift in the demand curve for your product/service:
Some economic factors that can shift the demand curve for laser eye surgery include changes in the price of substitute goods such as eyeglasses, technological advancements in the surgery procedures, and changes to insurance policies. Significant advancements in laser eye surgery can increase its demand despite cost changes and contribute to a higher elasticity of demand, while changes in insurance coverage can lead to higher or lower demand depending on the level of coverage available to patients.
The demand for laser eye surgery is subject to various economic factors that directly influence the quantity demanded by patients. Understanding these factors and analyzing their impact on the elasticity of demand can help managers develop sound pricing strategies and better serve their customers.