assist me with answering the following questions. Please keep in mind that the textbook used for this course is Economic for Healthcare Managers by Robert Lee and it should be incorporated in some of the answers. I cannot attach the textbook because it’s file source is too large. Other external sources may also be used in addition to the text book.
1.During the last five years average daily occupancy at Autumn Acres nursing home has slid from 125 to 95 even though Autumn Acres has cut its daily rate from $125 to $115. Do these data suggest that occupancy would have been higher if Autumn Acres had raised its rates? What changes in non-price demand factors might explain this? (There have been no changes in supply. The number of nursing home beds in the area has not changed during this period.)
2.Why is the demand for healthcare products usually inelastic? Why is the demand for an individual firm’s healthcare products usually elastic?
3.If the income elasticity of demand is 0.2, how would the volume of services change if income rose by 10 percent?
4.Your boss has asked you to describe how the demand for an over-the-counter sinus medication would change in the following situations. Assuming the price does not change, forecast whether the sales volume will go up, remain constant, or go down.
Expert Solution Preview
Introduction:
In the field of healthcare, understanding demand and its various factors is crucial for healthcare managers. This knowledge helps in evaluating patient preferences, pricing strategies, and predicting changes in healthcare utilization. In this context, I will provide answers to the questions related to demand in healthcare and its implications.
1. The decline in average daily occupancy at Autumn Acres nursing home from 125 to 95, despite a decrease in the daily rate from $125 to $115, raises the question of whether raising rates would have increased occupancy. While it is possible that increasing rates could have led to higher occupancy, other non-price demand factors are likely influencing this situation. Some possible changes in non-price demand factors include:
– Changes in consumer preferences: Shifts in consumer preferences towards alternative long-term care options, such as home healthcare or assisted living facilities, could have contributed to the decline in occupancy at Autumn Acres nursing home.
– Changes in demographics: If there has been a shift in the population composition in the area surrounding Autumn Acres, such as a decrease in the number of elderly individuals or a decrease in the need for nursing home care, this could have impacted occupancy rates.
– Changes in quality perception: If Autumn Acres has experienced a decline in perceived quality of care or reputation, it could have affected their occupancy rates, irrespective of the price reduction.
To fully understand the factors contributing to the decline in occupancy, a thorough analysis considering these non-price demand factors is necessary.
2. The demand for healthcare products is usually inelastic because healthcare is considered a necessity. Individuals are willing to pay a relatively higher price for healthcare products because their health and well-being are at stake. Additionally, healthcare products often have few substitutes, making it difficult for consumers to switch to alternative options.
On the other hand, the demand for an individual firm’s healthcare products is usually elastic. This is because individual firms face competition and have substitutes in the market. Consumers have the option to choose among different brands or providers, and price changes can significantly impact their purchase decisions. As a result, individual firms must be more responsive to price changes to remain competitive in the market.
3. If the income elasticity of demand is 0.2, a 10 percent increase in income would lead to a 2 percent increase in the volume of services demanded. Income elasticity of demand measures the responsiveness of demand to changes in income. In this case, the demand for services is income inelastic (0.2
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