Assessment -Project Report: respond to the following questions in your brief project report. Refer to the course assessment document and the handout that I posted on the VLE (i.e., Guidelines for Assessment 2) for the format of your report and page and typeface restrictions. Several studies have been conducted in the literature about cross-national income elasticities of demand. Please answer the following questions using both applicable economic concepts from our class and empirical evidence from the literature:
1) Briefly define income elasticity of demand.
2) What can we conclude from the empirical evidence about the income elasticities of demand for health care services across countries?
3) Do you believe better health care is available in the United Arab Emirates than in other developed nations? What indicators would you use to support your answer?
Please make sure to review the following two resources on APA style of citations before you submit your Assessment 2-Project Report assignment. I hope you will find them helpful.
TO BE RE-WRITTEN FROM THE SCRATCH
Focus on income elasticity of demand in UAE’shealthcare
The rise of individual incomes and countries’ GDPs has seen individuals, organizations and countries spend more on healthcare (World Health Organization, 2014);a tendency of income elasticity of demand. What is causing this tendency and is healthcare an inferior, normal or luxurious product? Is thisincome elasticity of demand the same within a country and across countries? How does this tendency in the United Arab Emirates (UAE) compare to the rest of the world, especially developed countries?
This essay investigates the above questions, giving recommendations on the way forward for healthcare expenditure in UAE.
Background
Income elasticity of demand is a ratio measurement of how the demand for a product is affected by the change in a people’s income, ceteris paribus. The ratio is calculated as the percentage change in demand to the percentage change in income. For example, if the demand for a product increases by 30% because incomes increase by 10% then the income elasticity of demand is 3 (30%/10%), with such a product being viewed as superior or luxurious because it has a positive income elasticity of demand greater than 1. If it is a positive ratio that is less than one, then this would be a necessity product. Notably, most healthcare services throughout the world consistently fall under this category(Folland and Goodman, 2012). If there was no change in demand because of change in income (zero ratio), then that would be a sticky product such as salt. Inferior products have a negative income elasticity of demand with an increase in income leading to a decrease in demand because of people changing to superior or luxurious products.
Income, priceand cross elasticities of demand show the economic performance of an industry or country, predict consumption trends and inform investors. This is because these elasticities are dependent on market segments as determined by prices, incomes and demographics.
Elasticities of demand aremostly evident when increase in household income leads to purchasing new products that match the new income bracket or when increase in prices lead to less demand. In the health industry, this is reflected by people seeking better healthcare services when they get more incomes or decreased demand for healthcare when prices increase(Ternopil State Medical University, undated). However, healthcare provision is subject to diminishing marginal productivity and diminishing marginal utility with each additional unit of healthcare consumption and additional improvement in health lea…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. cross-national income elasticities of demand ……………
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