This document discusses the theory and law of demand in healthcare. It defines demand as describing consumer behavior, not just desires. Demand is the quantity willing and able to be purchased at specific prices. A demand schedule lists quantities demanded at different prices, while a demand curve graphs this relationship with price on the y-axis and quantity on the x-axis, sloping downward. The demand for healthcare is derived from demand for health and is influenced by factors like age, income, prices of other goods, and expectations about the future. The law of demand states that, other things remaining equal, quantity demanded increases when price decreases and decreases when price increases.

1. Theory and law of demand in Health
Heera KC
Lecturer
MSc. Nursing(Midwifery)

2. What is Demand?
• Ordinarily, the term want, desire and demand are used interchangeably.
• These terms have different meanings.
 Suppose you desired to have a color TV, but you don’t have enough
money, then this will just be a wishful thinking but not a demand.
 You have money but you don’t want to spend it on color TV, this is just a
want not a demand.

3. Cont...
• Demand describes the behavior of consumers.
• It does not mean the desire to obtain something (Health care).
• The hungry man who can not pay for food has no demand for it.
• An individual’s demand for a good is the various quantities of
goods & services that the consumer is willing and able to buy at
each specific price.

4. QUANTITY DEMANDED
• Quantity demanded is a particular amount the buyers are
willing and able to buy at a given price during a given time
other things being the same.
 For example, at a price of Rs. 1 per icecream, the consumer
buys 5 icecreams.
Here the quantity demanded at Rs. 1 per ice-cream is 5 ice
creams.

5. Demand Schedule
• A demand schedule is a table that lists the
various quantities of a product or service that
someone is willing to buy over a range of possible
prices.

6. Example
Price of OPD Bill Client utilizing services/day
Rs. 1000 500
Rs. 500 1200
Rs. 100 5000

7. Demand curve
• Demand curve is simply a graphic representation of demand
schedule expressing the relationship between different
quantities demanded at different possible prices of a
commodity.
Alfred Marshall (1842 -1942)- Principles of economics.

8. Cont...
• The graph lists prices on the vertical axis and quantities
demanded on the horizontal axis.
• Each point on the graph shows how many units of the product or
service an individual will buy at a particular
price.
The demand curve is the line that connects these points.

9. Eg
0
100
200
300
400
500
10 20 30 40
Maternity service Rs.
Maternity service utilization in numbers

10. Cont...
• The demand curve slopes downward.
• This shows that people are normally willing to buy/use less of
a product at a high price and more at a low price.
• According to the law of demand, quantity/goods/service
demanded and price move in opposite directions.

11. A model of demand for medical Care
According to Michel Grossman, consumers have a demand for
health for two reasons:
– Health is a consumption commodity—it makes the consumer
feel better.
– Health is an investment commodity—a state of health will
determine the amount of time available to the consumer for
productivity.

13. Grossman’s demand model…
• According to this model every one inherits a stock of health when
born.
• Health depreciated overtime, however an investment is required
to sustain health.
• As peoples’ age advances there is an increase in rate of illness
and in the utilization of health services.
• The stock of health can be sustained by investment to maintain
health., such as use of health services and health promoting
activities.

14. A view of medical care demand being derived from the demand
for health implies the following:
– increase in age result in an increase in the rate at which the
person’s stock of health depreciates.
– Over the life cycle people will attempt to offset part of the
increased rate of depreciation in their stock of health by
increasing their expenditure on health

15. • The demand for medical care will increase with increases in
person’s income.
– Education may have a negative effect on the demand for
health care, because more highly educated people are
presumed to be more efficient in producing health.

16. Determinants/ factors of demand
Demand Curves can shift in response to the following factors:
– Buyers (# of): changes in the number of consumers
– Income: changes in consumers’ income
– Tastes: changes in preference or popularity of product/ service
For eg: age, sex, country, family culture, education
– Expectations: changes in what consumers expect to happen in
the future
– Related goods: compliments and substitutes
( BITER: factors that shift the demand curve)

18. Cont...

19. Cont...
b) Complementary goods: Complementary goods are those goods which
complete the demand for each other, and are therefore, demanded
together.
A fall in the price of one causes increase in the demand of the other and vice
versa.
Complementary goods are car and petrol/ diesel, torch and battery etc.
In health care: Complementary/alternative services (maternity and
newborn care services

20. Cont...

21. Cont...
Price of a commodity (higher the price lower the demand and vice
versa):
Price of other goods.
Health need
Consumers Perception of quality
Health service providers’ behaviour
Supply of commodities
Reputation, information and communication
Accessibility of services
Seasonal issues and Health practices

22. Law of demand
• The law of demand states that other things remaining the
same, (income, prices of other goods) quantity demanded of a
commodity increases with fall in the price and decreases with
rise in price.

23. Assumption of the law of demand
The law of demand functions properly when “other things
remain the same’’.
The main assumptions of the law are as follows:
i. Tastes and preferences of the consumer remain constant.
ii. There is no change in the income of the consumer.
iii. Price of the related goods do not change.
iv. The consumer do not expect any change in the price of the
commodity in the near future.