Description
You are advising the stakeholders of a small firm that is one of a handful of manufacturers of disposable contact lenses, wetting solution, and other products related to eye care. The stakeholders are wrestling with a proposal to implement a price increase for some, all, or a large number of their products. They all agree that doing so can help offset recent cost increases the firm has experienced, but there the agreement ends.
Some favor a small price increase for products across the board, noting that, from the standpoint of the market, demand for healthcare products is relatively inelastic. Others believe that strategy could backfire, hurting more than helping. Instead, they argue, there are a number of factors to consider—the strength of the economy, their competition, trends in the market for specific types of products, and so on. They believe, therefore, products or types of products should be considered on a case-by-case basis: while a price increase for one product might yield positive results, a price increase for another might wipe out any gain achieved by the first.
What would you say to these stakeholders? Formulate your advice, drawing on scholarly sources, and the concept of healthcare price elasticity. Be sure to explain and support your advice by citing sources and providing examples.
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Explanation & Answer
Attached.
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Price Elasticity
Price elasticity in the health care system is used to indicate how the demand of consumers
usually changes in case the price of health care products change. Therefore, the price elasticity
which are related to medical services is the measure in percentage of how the price of a medical
product or service changes. The products in this case is one like the eye wear. The price elasticity
which is related to medical services is assumed to range between 0 and negative 1 by some
academicians which therefore means that incase the price is raised by 10%, the way individuals
will demand for this products and services will in return fall by 10% or less. Hence, medical
products are seen to be inelas...
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