Czech University of Life Sciences in Prague Faculty of Economics and Management
Empirical Research in Economics

Supply and Demand of Healthcare

Veronika Havlíčková

AEM 2012

When we compare demand for usual goods and demand for healthcare we can characterize the demand for healthcare as irregular and unpredictable. The intensity and elasticity of demand is affected by several facts. Degradation of health conditions (illnesses, wounds) is connected with huge losses and the cost itself. There are also costs for healthcare that have to be considered. People lose their money, have to change their lifestyle. Pain and discomfort are a serious intervention into a personal integrity.

The price elasticity of demand for healthcare really is controversial. When trying to find it there is a need to have on mind a remarkable heterogeneity of the production. The question of finding, whether the demand curve is not very elastic (whether most of the expenses for healthcare is involuntary – dictated by the actual health condition) or relatively elastic is rather difficult. Most experts however believe that health care demand is fairly inelastic. If you are sick, you will not be very price sensitive. There are exceptions like plastice surgery but most studies find that patients are insensitive to changes in health care prices. The elasticity is according to some estimations between 0,2 and 0,7.

It’s important to separate healthcare and the actual health. If there is the connection between these two entities there can be the demand of an individual for healthcare connected with a demand for health. If the connection is not that strong, it’s more of a demonstration of an individual of his interest in getting healthy either by demanding a particular healthcare that he assumes will lead to his healing or if his condition is accepted as