The Wall Street Journal e, Monday April 26, 2004. Global health care has arrived
ID: 1146168 • Letter: T
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The Wall Street Journal e, Monday April 26, 2004. Global health care has arrived. During 2003, Canadian resident Terry Salo flew to India to have his hip replaced. He paid only a quarter of the cost of similar treatments in the U.S. and shaved a year off his waiting time for free care in Canada. The very satisfied Mr. Salo played golf a month later. Mr. Salo is not alone. Sixty thousand foreign patients flocked to India's Apollo Hospitals to obtain cheaper and quicker medical care than was available in their home countries. Apollo, founded in 1983 as a single hospital, has grown into a 37-hospital chain with 6,400 beds and marketing offices in London and Dubai. Apollo's overall private mission is to provide world class health care to India but also profit by substituting high end medical care to Western patients at a fraction of the cost. Apollo also conducts patient billing for U.S. firms and does clinical trials for large pharmaceuticals. Another area of company expertise is "medical tourism." A patient can schedule a seaside resort vacation to convalesce from their surgery as soon as they are well enough to travel. The consulting firm McKinsey and Company expects this combination of medical care and tourism in India to approach $2 billion a year by 2012. How does the concept of elasticity of demand relate to this topic? Briefly discuss.Explanation / Answer
The elasticity of demand means responsiveness of the demand for a product or service in response to the increase or decrease in price. In the above scenario, people are demanding medical services which had a very inelastic demand till now. But now patients from all over the world are flocking to Indian hospitals in order to get a cheaper medical facility. This suggests that the demand elasticity for medical treatment is increasing with the globalization.
As the prices are high in the home country people are looking for locations where they can get the same treatments at a much lower cost. If the demand was inelastic like it was before globalization the patients will have to pay the higher cost and get the treatment done. But now the demand is elastic i.e. people are ready to choose an alternative and decrease the demand from their home country in response to increase in the price of services.
More the globalization of medical services increases more elastic its demand will become. Increased globalization will make the market more competitive and demand more elastic. It is like comparing a perfectly competitive market i.e. globalized service and an oligopoly market i.e. service provider in the country. More the competition increase the demand will be more elastic. This will continue till the price get same in both the home and the host country.
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