Consumer demand for Medical services


The situation surrounding construction of a veteran home in this state has brought to light several issues central to the provision of healthcare. Provision of health services is an emotive issue as the health by itself is a sensitive issue. This is because; as stipulated in elementary economics, a product can be categorized as either a good or a service. Keeping this in mind the uniqueness of health as a service should not encourage parties involved in its provision to disregard principles as outlined by economic theory.

Cost is an important consideration as in all economic activity. In healthcare, the cost incurred by the consumer for obvious reasons is a common flashpoint. The consumer in most instances does not directly pay for healthcare. Most of the costs are covered by insurance cover provided by either the government or private institutions. By sheltering the consumer from costs of healthcare, the demand for services is raised leading to a phenomenon referred to as the moral hazard (Fucsh, 1996). This scenario posses unique challenge as for the government to be able to pay for healthcare it needs to consider the costs involved in setting up infrastructure such as hospitals and still be able to afford to pay for recurring costs such as doctors fee. In economics, an important tool that aids in assessment of these costs is the demand and supply curve.

Demand drives healthcare as with other consumer goods. The Grossman models provide an effective guide in determining the effect of demand on health as a service. Grossman views health as a stock that requires frequent capital investments. It is consumed yet it is an investment as the beneficiary becomes capable of productivity and save income and time lost when incapacitated. In accordance to Grossman, equilibrium is struck when marginal costs tally with the marginal benefit (Grossman, 1972). Adopting the patients view is critical in planning, as they are central to existence of the service, healthcare in this case. Furthermore, a simple price curve reveals that healthcare has an inelastic price curve. This means that its demand is not influenced by price as unlike commodities like sugar that have a substitute, healthcare has no substitute.

Land is one of the factors of production. In provision of healthcare, infrastructure plays a critical role. The role of land as a factor in the provision of healthcare raises pertinent issues in the realm of urban planning. Economic fundamentals need to be considered to enable effective regional planning. This is achieved through thorough assessment of the market such as the demographics and socioeconomic characteristics. This should then be tied to the community by assessing how the community would benefit and the economic impact of the project by investigating the economic related aspects of such a project.

Capital another factor of production should be considered. Scarcity characterizes all factors of production. In order to make economic sense, models have been adopted to enable noteworthy use of scare resource. In addition, the due process of identification of the costs, measurements of the cost and subsequently the conversion of costs into monetary value should be followed in accordance with the principles of health economics .Among the models developed in economics is the Production possibility Frontier. This model enables the assessment of the marginal rate of transformation, the efficiency and the opportunity cost of a decision (Drummond & Michael, 2005).

It is my recommendation that economics has a central role in the provision of healthcare. Political wants can only be fulfilled in the context of proper economic practice. Sound economics as stipulated by scarcity, demands proper use of available resource. The cost of disregard of economic principles would be dire. It may result in denial of healthcare to another member of the society. In addition, in healthcare the question of equity is of importance as the society’s requirements for justice need to be met.






Drummond, M. F. (2005). Methods for the Economic Evaluation of Health Care Programmes. New York: Oxford University Press.

Fucsh, V. (1996). American economic review. American Economic Association.

Grossman, M. (1972). “On the Concept of Health Capital and the Demand for Health.” Journal of Political Economy. March-April/80(2): 223-55

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