Download health care case study Rebecca Green

Rebecca Green
The Healthcare Industry
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The health care industry is the a collection of sectors within the economic
system that provides goods and services to treat patients with curative,
preventative, rehabilitative and palliative care
It included the generation and commercialization of goods and services lending
themselves to maintaining and establishing health
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Healthcare is classified as a merit good because consuming it provides benefits
to others as well as to the individual consumers e.g. vaccinations against
infectious diseases provides protection for the consumer but also provides
protection from others catching the disease from those who are vaccinated.
Factors that affect demand for health care
 Population
 Price of substitutes
 Income
 Health of country
 Availability of resources for living
 Wealth of country
 Quality of healthcare
 Cost of health care
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Demand is the quantity of a good or service that consumers are willing and
able to buy at given prices in a given period of time
As healthcare is free the demand for treatment will outweigh the supply and
this can cause delays and long waiting time for treatment
Factors affecting supply of health care
 Technology
 Number of hospitals
 Costs of production e.g. wages
 Availability of resources
 Funding for treatments
 Funding for research
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Supply is the quantity of a good or service that firms are willing and able to
sell at a given price in a given period of time.
Development of new treatments, technologies and drugs increases the NHS’s
ability to supply, but also encourages demand to such an extent that demand
substantially exceeds supply
This creates long waiting lists and shortages of hospital beds. If the NHS were
to be privatized this would allow prices to rise to reflect the true cost of
supply
Rebecca Green
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As the price of a treatment or drug increases the supply will decrease
because of this set budget meaning that there will be a shortage in supply.
Elasticity of the health care industry
PED= The demand for healthcare in the UK is inelastic because if the cost of the
treatment increases this will not effect the demand as most treatment is funded by
the government so it has no effect on the consumer as they do not have to pay for it.
As new treatments are developing the demand for healthcare is also increasing as
more people are getting treatment for conditions that were not available 10 years
ago.
XPED= there is a positive price elasticity of demand for healthcare in the UK, as the
price of private healthcare rises, this will cause an increase in demand for public
healthcare as it is cheaper. This is because the NHS is a substitute good, the
relationship between private and public healthcare however, has only a small
relationship because people willing to pay for private treatment will not be too
affected by a rise in price and people not willing to pay for private treatment are
able to get it on the NHS
PES= the price elasticity of supply of the NHS is inelastic as the government would
find it hard to change their production levels over time as they have a fixed budget
each year and a rise in demand would not mean a rise in supply as there is a limited
supply that the government can afford to pay.
Macroeconomic factors which affect the healthcare industry
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In 2013/14 spending by the NHS was £109.72 billion – which is approximately
20% of all government spending
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Age is a big factor affecting the healthcare industry as older people are more
likely to need treatment for bigger issues such as strokes or heart conditions.
Rebecca Green
This could be a problem in the future as we have an ageing population and this
could put a strain on the healthcare industry as there is already a shortage in
supply and this could lead to further difficulties.
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There are government policies in place which affect the healthcare industry,
such as rules and regulations on how much treatment an individual can receive
and the waiting time of an operation if another persons needs outweigh your
own