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Hen 368 lecture 7 the demand for medical care

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Demand for Medical Care

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Hen 368 lecture 7 the demand for medical care

  1. 1. Health Economics ! Lecture 7 The Demand for Medical Care
  2. 2. SPECIAL ! This week only Gall Blatter surgery 50% percent off
  3. 3. Derived Demand
  4. 4. Derived Demand Getting health by buying medical care
  5. 5. Normal Market
  6. 6. Normal Market Medical Market
  7. 7. Normal Market Medical Market Planned
  8. 8. Normal Market Medical Market Planned Yes
  9. 9. Normal Market Medical Market Planned Yes No
  10. 10. Normal Market Medical Market Planned Yes No Know Price
  11. 11. Normal Market Medical Market Planned Yes No Know Price Yes
  12. 12. Normal Market Medical Market Planned Yes No Know Price Yes No
  13. 13. Normal Market Medical Market Planned Yes No Know Price Yes No Guarantee
  14. 14. Normal Market Medical Market Planned Yes No Know Price Yes No Guarantee Yes
  15. 15. Normal Market Medical Market Planned Yes No Know Price Yes No Guarantee Yes No
  16. 16. Normal Market Medical Market Planned Yes No Know Price Yes No Guarantee Yes No Equal Information
  17. 17. Normal Market Medical Market Planned Yes No Know Price Yes No Guarantee Yes No Equal Information Yes
  18. 18. Normal Market Medical Market Planned Yes No Know Price Yes No Guarantee Yes No Equal Information Yes No
  19. 19. Health Health and Medical Costs Medical Costs Large Gain Diminishing Marginal Utility Small Gain
  20. 20. The Law of Demand 100 90 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 Price Quantity
  21. 21. The Law of Demand 100 90 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 Price Quantity
  22. 22. The Law of Demand 100 90 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 Price Quantity
  23. 23. The Law of Demand 100 90 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 Price Quantity
  24. 24. The Law of Demand 100 90 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 Price Quantity
  25. 25. The Law of Demand 100 90 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 Price Quantity
  26. 26. The Law of Demand 100 90 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 Price Quantity
  27. 27. The Law of Demand 100 90 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 Price Quantity
  28. 28. The Law of Demand 100 90 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 Price Quantity
  29. 29. Law of Demand ! When price falls quantity demand increases ! When price increases quantity demanded falls.
  30. 30. Demand for Medical Care
  31. 31. 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
  32. 32. Out-of-Pocket Price
  33. 33. Out-of-Pocket Price After insurance Coinsurance Copayments Deductible
  34. 34. Income
  35. 35. Income Higher income tends to demand more medical care
  36. 36. Time Costs
  37. 37. Time Costs Time to visit medical provider and the opportunity costs
  38. 38. Prices of Substitutes and Compliments
  39. 39. Prices of Substitutes and Compliments OR ! AND
  40. 40. Tastes and Preferences
  41. 41. Tastes and Preferences Marital Status - less Education - ? Lifestyle - risky
  42. 42. Physical and Mental Profile
  43. 43. Physical and Mental Profile Gender - women more Race/Ethnicity Age - older more
  44. 44. State of Health
  45. 45. State of Health Sicker - More Unhealthy - More
  46. 46. Quality of Care
  47. 47. Quality of Care Hard to measure nice office ! perception is more important than reality
  48. 48. 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
  49. 49. Elasticity ! A measure of how much one economic variable responds to changes in another economic variable
  50. 50. Elasticity Percentage Change in Quantity Demanded Percentage Change in Price
  51. 51. Price Elasticity of Demand
  52. 52. Price Elasticity of Demand
  53. 53. Price Elasticity of Demand % %
  54. 54. Price Elasticity of Demand % % QD
  55. 55. Price Elasticity of Demand % % QD P
  56. 56. Price Elasticity of Demand % % QD P Percentage Change in Quantity Demanded Percentage Change in Price
  57. 57. Price Elasticity of Demand 1. Calculate Elasticity 2. Take Absolute Value 3. Compare to benchmark of 1 Inelastic Elastic <1 >1 1
  58. 58. What determines Price Elasticity of Demand?
  59. 59. Close Substitutes Passage of Time Luxuries vs. Necessities Definition of Market Share of Budget
  60. 60. Close Substitutes
  61. 61. Close Substitutes
  62. 62. Close Substitutes Elastic >1
  63. 63. Close Substitutes Elastic >1
  64. 64. Close Substitutes Elastic >1 Inelastic <1
  65. 65. Passage of Time
  66. 66. Passage of Time More Time More Elastic
  67. 67. Luxuries vs. Necessities
  68. 68. Luxuries vs. Necessities Elastic
  69. 69. Luxuries vs. Necessities Elastic Inelastic
  70. 70. Share of the Budget Small Large
  71. 71. Share of the Budget Small Large Inelastic
  72. 72. Share of the Budget Small Large Inelastic Elastic
  73. 73. Price Elasticity of Demand % QD ! % P
  74. 74. $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1 2 3 4 5 6 7 8 9 10 Gallons - Gasoline Price
  75. 75. $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1 2 3 4 5 6 7 8 9 10 Gallons - Gasoline Price
  76. 76. $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1 2 3 4 5 6 7 8 9 10 Gallons - Gasoline Price
  77. 77. $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1 2 3 4 5 6 7 8 9 10 Gallons - Gasoline Price
  78. 78. $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1 2 3 4 5 6 7 8 9 10 Gallons - Gasoline Price
  79. 79. $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1 2 3 4 5 6 7 8 9 10 Gallons - Gasoline Price %rQD %rP
  80. 80. $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1 2 3 4 5 6 7 8 9 10 Gallons - Gasoline Price %rQD %rP (4-5)÷5 (6-3)÷3
  81. 81. $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1 2 3 4 5 6 7 8 9 10 Gallons - Gasoline Price %rQD %rP (4-5)÷5 (6-3)÷3 -20% +100%
  82. 82. $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 1 2 3 4 5 6 7 8 9 10 Gallons - Gasoline Price %rQD %rP (4-5)÷5 (6-3)÷3 -20% +100% .2
  83. 83. Close Substitutes Passage of Time Luxuries vs. Necessities Definition of Market Share of Budget
  84. 84. Income Elasticity of Demand ! Normal, Inferior, or Luxury? % QD ! % I
  85. 85. Income Elasticity of Demand Inferior Normal <0 >1 0 1 Luxury 0 to 1

Demand for Medical Care

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