ECO 605 Discussion 1.1: Factors of Demand
ECO 605 Discussion 1.1: Factors of Demand
Demand is the willingness and ability for a person to pay for products and/or services at various prices (Hicks, 2021). Quantity demand is the amount of a service or product that a person or organization is able to purchase at an agreed upon rate during a period of time (Hicks, 2021). Demand primarily focuses on how there are different prices for a similar product/service where quantity demanded focuses on a set price for a period of time. A demand example could be baseball game tickets. If the ticket price decreases from $25 to $20, the demand would increase. Once consumers are satisfied or tired of attending baseball games, then demand will begin to decrease. A great quantity demanded example would be paying rent. One pays $1000 for the rent each month. This is a set price for the space being rented.
Factors that will affect the demand for a product can be separated into four broad categories: Amount of income, the price of similar products or services and the competition, preferences, and expectations (Hicks, 2021).
As people’s incomes increase, while the price of a routine physical examination at a provider’s office stays the same, the quantity demanded for routine physical examinations will increase. The demand curve would then shift to the right showing an increase in demand for the routine physical examinations. An example for the price of similar products and services is how the price of laser eye corrective surgery is decreasing, resulting in an increased demand for the surgery. This leads to a decreased demand for glasses and contacts, the surgery’s substitute. A personal preference example could be how a person may have a preference towards a specific drug because of how the drug was advertised compared to the competition. Expectations can affect the attitude of an individual and when they believe they need a product or service. If a consumer needs a root canal dental surgery and expects the price of a root canal surgery to increase, the consumer may want to have the surgery completed sooner rather than later to save money.
Reference
Hicks, L. L. (2021). Economics of Health and Medical Care. Jones & Bartlett Learning.
According to “Economics of Health and Medical Care,” demand is consumer willingness and ability to purchase quantities of services at various specified prices… with all other causal factors held constant (Hicks, 2021). On the other hand, quantity demanded is consumer willingness and ability to purchase quantities of service at one, specific, price (Hicks, 2021). To differentiate the two terms, demand focuses on many different prices of goods/services ranging from $0-50, whereas, quantity demanded would focus on goods/services that would cost $15.
There are many factors that could change demand in a product. One factor is income. Income has a relationship that is positively related to demand for normal goods/services. For example, if income increases, the quantity demanded would increase as well, unless those goods/services are inferior, which would decrease the quantity demanded. The next factor is the price of related goods. There are two types of goods/services: complements and substitutes. If there is a decrease in the price of one complement, then there will be a decrease in the demand of that complement. On the other hand, if there is a decrease in the price of one substitute, there will be an increase in the demand for that substitute. The next factor is tastes and preferences. Tastes differ from income and price because it is more of a feeling toward a good/service. Tastes/preferences can differ in different age groups, cultures, levels of education, and etc. Lastly, expectations are a factor that can change demand in a product. Expectations about future prices are directly related to present demand. For example, If it is expected that prices go up for medical supplies in the future, there will be an increase in present-day demand for those supplies. Whereas, if it is expected for prices to drop for medical supplies for the future, there will be a decrease in demand for present-day medical supplies.
Since Coronavirus is a big topic in the medical field, let’s say that there is a medical treatment for coronavirus. It could be a pharmaceutical drug that you take every day for a course of 5 days that would decrease the severity and length of symptoms so you can return to work, and life, in general, sooner than the usual “10-day” quarantine. How would the factors mentioned affect the demand in this treatment? First, in regards to income, when income increases, the demand for this Coronavirus treatment would also increase because it is considered a “normal ” good/service. Next, the price of the treatment could affect the demand.
Let’s say there is a brand name pharmaceutical drug and a “generic substitute” of that pharmaceutical drug. The generic substitute would be decreased in price, compared to the brand, so, therefore, there would be an increased demand for that Coronavirus treatment. Next, personal tastes could affect the feelings an individual might have toward the treatment. For example, if an individual has a Graduate level of education in a medical field, they may think that this treatment would be very helpful in this pandemic. However, let’s say an individual has a high school level of education and they don’t really understand the importance of the treatment since they were “asymptomatic” and don’t know about the severity of symptoms others can endure. Lastly, expectations can affect the demand of this treatment. If people think there will be an increase in Covid cases over the holidays and there will be an increase in price in the future , they may ask their doctor to prescribe the treatment in the present time so they can pick it up from the pharmacy and “hold on” to it, while the prices are low, for the future.
Reference
Hicks, L. L. (2021). Economics of Health and Medical Care. Jones & Bartlett Learning.
Demand refers to a consumers’ willingness to purchase a certain product at various prices. Quantity demand refers to consumers’ willingness and ability to purchase the same product at a specific price. A little fun fact about myself is that other than my bedside nursing job, I work at my family’s Honda powersports dealership doing sales and financing. During this pandemic, I have seen the craziness of supply and demand in the powersports industry. I am sure I will relate this to other discussion boards that I post in the future. In 2020 and 2021, due to product shortages and shipping problems, certain Hondas were nearly impossible to come by. One of the products that we used to have in stock and not sell very many of became a product that sold like crazy. No one could get any in stock, and those that did were able to sell it at an increased price. Honda was able to increase all of their prices during this period of high demand for their products, and the consumers were willing to pay to get these products. This is common throughout the auto industry as well, which makes me wonder how it will become sustainable over the next few years. Since these production companies know the demand for their products is so high, they can drive up their prices. This is a great example of demand vs. quantity demanded. At what point will consumers decide that the product is no longer worth the price being paid to obtain the product and the demand will decrease (or return back to normal, pre-pandemic demand)?
According to Hicks (2021), four categories that will change demand for a product include income, price of related goods and services, tastes/preferences, and expectations. An increase in a person’s income can relate to an increase in demand for goods or services. In regard to medical expenses, there may be an increase in preventative healthcare visits since the consumer can afford to pay for visits before they become necessary. A decrease in income can lead to using healthcare only when absolutely necessary. Just this past month I switched jobs and was without health insurance for a month and had a gap in paychecks for a few weeks. During that time, I fortunately did not need to seek healthcare services, but if I did need to, I likely would have delayed my care to try to wait for my income and insurance services to help me pay for what I needed. Now that I have health insurance and my regular pay, I will go to my annual doctors appointments, dentists visits, etc.. According to Ghorbani (2021), an increase in income often will not change the way consumers seek healthcare services, but may lead to an increase in luxury healthcare services. This makes me think of IV hydration services, cosmetic services, etc..
Prices of related goods and services can also affect the demand for a product or service. This was a hard concept for me to find an example for. It is pretty difficult to price shop for prices for certain healthcare goods or services. This reminds me of when an urgent care clinic in Pittsfield, a town that is local to my area, was advertising for a $40 office visit with or without insurance to see a simple complaint. Many people began going to this urgent care rather than the other urgent care in town, even if it was a bit more of a drive. Hicks (2021) mentions that the shift in demand also relates to how similar the substitute or other good/service is to the compared good/service.
Tastes and preferences can also influence the demand of a product or service. A great example of this is in Springfield, IL. We have two level one trauma centers blocks apart from each other. Both fully equipped to handle and treat most cases that present to the emergency department. When an ambulance responds to a call, the patient often requests which hospital that they want to be taken to be seen at, or their insurance influences which hospital they can be seen at. I work at one of the emergency departments in Springfield, and patients are often very particular about which hospital they get taken to. The way that they are treated in the emergency department and in the inpatient setting if they get admitted often influences the patient’s preferences.
References
Ghorbani, A. (2021). Demand for health and healthcare. Intech Open (5), 3, 1-15. https://doi.org/10.5772/intechopen.98915 (Links to an external site.)
Hicks, L. (2021). Economics of health and medical care (7th edition). Jones and Bartlett
According to “Economics of Health and Medical Care,” demand is consumer willingness and ability to purchase quantities of services at various specified prices… with all other causal factors held constant (Hicks, 2021). On the other hand, quantity demanded is consumer willingness and ability to purchase quantities of service at one, specific, price (Hicks, 2021). To differentiate the two terms, demand focuses on many different prices of goods/services ranging from $0-50, whereas, quantity demanded would focus on goods/services that would cost $15.
There are many factors that could change demand in a product. One factor is income. Income has a relationship that is positively related to demand for normal goods/services. For example, if income increases, the quantity demanded would increase as well, unless those goods/services are inferior, which would decrease the quantity demanded. The next factor is the price of related goods. There are two types of goods/services: complements and substitutes. If there is a decrease in the price of one complement, then there will be a decrease in the demand of that complement. On the other hand, if there is a decrease in the price of one substitute, there will be an increase in the demand for that substitute. The next factor is tastes and preferences. Tastes differ from income and price because it is more of a feeling toward a good/service. Tastes/preferences can differ in different age groups, cultures, levels of education, and etc. Lastly, expectations are a factor that can change demand in a product. Expectations about future prices are directly related to present demand. For example, If it is expected that prices go up for medical supplies in the future, there will be an increase in present-day demand for those supplies. Whereas, if it is expected for prices to drop for medical supplies for the future, there will be a decrease in demand for present-day medical supplies.
Since Coronavirus is a big topic in the medical field, let’s say that there is a medical treatment for coronavirus. It could be a pharmaceutical drug that you take every day for a course of 5 days that would decrease the severity and length of symptoms so you can return to work, and life, in general, sooner than the usual “10-day” quarantine. How would the factors mentioned affect the demand in this treatment? First, in regards to income, when income increases, the demand for this Coronavirus treatment would also increase because it is considered a “normal ” good/service. Next, the price of the treatment could affect the demand. Let’s say there is a brand name pharmaceutical drug and a “generic substitute” of that pharmaceutical drug. The generic substitute would be decreased in price, compared to the brand, so, therefore, there would be an increased demand for that Coronavirus treatment. Next, personal tastes could affect the feelings an individual might have toward the treatment. For example, if an individual has a Graduate level of education in a medical field, they may think that this treatment would be very helpful in this pandemic. However, let’s say an individual has a high school level of education and they don’t really understand the importance of the treatment since they were “asymptomatic” and don’t know about the severity of symptoms others can endure. Lastly, expectations can affect the demand of this treatment. If people think there will be an increase in Covid cases over the holidays and there will be an increase in price in the future , they may ask their doctor to prescribe the treatment in the present time so they can pick it up from the pharmacy and “hold on” to it, while the prices are low, for the future.
Reference
Hicks, L. L. (2021). Economics of Health and Medical Care. Jones & Bartlett Learning.