1) Price elasticity of demand is an important tool for managers in a selling environment in deciding...

Question

1) Price elasticity of demand is an important tool for managers in a selling environment in deciding what to put on sale. Discuss how managers of over the counter healthcare products could use the concepts of elasticity to maximize profit.
2) In your opinion, has the Affordable Care Act contributed to the efficient allocation of resources in the healthcare industry? (Do not just provide your opinion. Your statement must be backed by economic principles).

700 words (350 words each).

David · Accepted Answer

1 
 
1) Price elasticity of demand is an important tool for managers in a selling environment in 
deciding what to put on sale. Discuss how managers of over the counter healthcare products 
could use the concepts of elasticity to maximize profit. 
Elasticity of demand with respect to price plays an important role in determining the amount to 
be put over the counter to sale in case of healthcare products. This is because higher the price 
elasticity of demand, higher will be the chances that consumer will make large scale changes in 
their quantity demand. There are many factors which affect the price elasticity of demand in 
healthcare field. These include substituting other alternative medicines like generic medicines 
and equipment in place of company oriented products, income share to be spent over purchase of 
these healthcare products, the necessity of the product or the nature of the product in terms of 
being a luxury good or an essential item, and finally the time available with the consumer to find 
other alternatives profitable from the consumer’s point of view. In order to maximize profit, 
healthcare managers can study the elasticity value existing in their market because if the 
elasticity is too low then the seller will be able to earn higher profits under the condition of 
absolute monopoly. It involves supplying less quantity of healthcare products in the market as in 
the case of patented medicines when there are no effective alternatives available to the patients in 
a given period of time. In case of higher price elasticity of demand,

1) Price elasticity of demand is an important tool for managers in a selling environment in deciding what to put on sale. Discuss how managers of over the counter healthcare products could use the...

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