Income elasticity of health care essay

Income elasticity of health care essay What is elasticity and why its important for economics? The term of elasticity plays a quite big role in economics. For any country its important to define the income elasticity of health care demand to manage the health economics more effectively. Two countries, Great Britain and United States were first who started to make research in such field as health economics. Elasticity in economics measures the ability of customers to buy goods. If the income elasticity goes high, it means that the customers are able to buy much more of this good. The ability to buy the goods increases with the growing of the customers income. If the income elasticity is positive, it means the health care is a normal good. For example, the income increased on 20% may lead to 10% increase of health care expenses. But if the income elasticity is negative, we can say that the health care is an inferior good. It can happen if health care expenses were decreased on 10% because of 20% increase of consumers income. When peoples income is increasing, their demand for health care increases too. It explains why highly developed countries have much higher level of medicine and health care compared to poor countries. Thats why its hard to define to sort health care services as necessity or optional, because for poor countries some services could be luxury, at the same time in rich countries the same health care services will be necessity. This dependence shows us that with growing income the demand is increasing as well. Needless to say that the elasticity of demand for health care services will be various. So, it will be more correctly if to value demand elasticities for each type of health services, such as x-ray, lab work, preventive care, etc. Health care services are very sensitive to income and prices, thats why some of these services (such as life saving measures, urgent operations, etc.) should be allowed even for poor people free or at a special price, because for them its impossible to pay for health care services the same price as rich or medium class people can allow. Of course, its necessary to make more research on health care economics to understand the demand. Its clear that elderly people have a higher demand for health care, so the costs of health care will increase for societies of aging people. Poor countries have lower demand, thats why health care wont be highly developed there.