Healthcare Economics
Elasticity and utility
Elasticity is understood as “a measure of the responsiveness of a given product demand to the changes in the determinants” (Ringel et al., 2002, p. 2). In terms of healthcare, the elasticity relationship exists between the price and demand. In a normal marketplace, elasticity exists through the concept of increase and decrease in prices and demand of products. According to Ringel et al. (2002), in terms of healthcare provision, the concept of price and demand for services does not work as in other marketplaces. This means that consumers pay for the healthcare services not based on the demand as other many products but instead on the availability of a cost-sharing plan. As the authors explain, this makes it difficult to explain the concept of demand and pricing of healthcare services (p. 12). On the other hand, the concept of utility can be understood in terms of satisfaction, well-being, and welfare. According to Kapteyn (1985), the term “utility” is used to explain how a product or services people purchase tend to fulfill their desires and happiness. A good example of utility in healthcare is when a customer purchases a drug and the satisfaction is associated with how frequent the customer would be using the drug to get the satisfaction, which is getting better.
Shifters that may affect the supply and demand relationship
Economists claim that demand and supply refer to the quantity of a given product that suppliers are able to produce at a certain price (Richards, 2017). Demand and supply are affected by different shifters. Some of the demand shifters include the buyers, income, taste and preferences, related good and expectations. In terms of buyers, the number of people willing to purchase a certain product will affect the demand for such a product. The same applies to other factors; for instance, the income household will determine how much they decide to spend on products. Richards (2017) argues that a decrease in product demand can be explained in terms of household income such that when a consumer’s income reduces the same effect is applied to product demand. Richards (2017) further states that when consumer taste or preferences decrease, the product demand also decreases.
For supply, some of the shifters include technology, other products, and a number of sellers, subsidies, and taxes among other factors. Technology affects businesses in different ways. When there is faster and better technology, more products can be produced. In the case of healthcare, the availability of better and faster technology enhances the process of service delivery and quality of the services delivered; thus, more consumers. In terms of other products or players in the market, more healthcare institutions mean that there is a reduction in the number of customers attending one facility. Richards (2017) explains that an increase in the supply of reduces the cost of doing business and the shift move to the left.
How economies of scale affect profit maximization
An economy of scale is understood as the cost advantage experienced by an organization when the output level is increased. The concept of economy of scale can be effectively implemented during the production process in the organization. In terms of production, the organization focuses on all the activities associated with the commodity and not the final consumer (CFI, 2016). In terms of profit maximization, economies of scale help reduce per unit fixed cost, which also results in higher production; thus, increase in profits (CFI, 2016). Further, economies of scale also reduce per unit variable cost, which helps in increasing the supply since more efficient production means that consumers get their products on time and faster. This also translates into more profits.
Discuss the relationship between supply and demand in today’s competitive healthcare markets
As Scott, Solomon and McGowant (2001) explain, it is difficult to apply the economic thinking in healthcare system because they lack the characteristics required to determine the appropriate market price that reflects its economic value of resources. However, the process of resource allocation in the healthcare institution can be used to explain the economic values. Mwachofi and Al-Assaf (2011) argue that based on the limited resources in the healthcare organizations, demand and supply concepts may be difficult to understand. But, these concepts can be explained in terms of efficiency. Efficiency is a form of theory that is used to explain the relationship between the unlimited wants and the limited resources used to achieve those unlimited wants (Mwachofi& Al-Assaf, 2011). For example, in a healthcare situation, a nurse or healthcare provider who works there may be earning $200 a week. But, since he or she has more wants to meet with that $200, he or she has to prioritize on what to spend on to meet the highest level of satisfaction. This means that for one cannot meet all the wants, but instead decide to achieve those that are most important; thus, the concept of trade-offs. According to Mwachofi and Al-Assaf (2011), trade-offs are the different wants that people do not meet because of unlimited resources. Therefore, in terms of efficiency in a healthcare institution, resources are channeled into places or areas where highest satisfaction value or level would be achieved.
How the concepts are used to evaluate financial viability in a healthcare organization
The concept of demand and supply can be used to how financial resources are viably applied in the healthcare organizations. For example, in understanding how much patients may decide to spend on healthcare services such as osteopathy, one must understand the factors influencing the purchasing power such as income, preferences, and prices of the services (OHE, 2006). This means that when the prices of a given healthcare service increase, more people will not get the service. For example, if the price of an eye check is increased, many people would not have their eyes checked regularly.

References
CFI.(2016). Economies of Scale.Corporate Finance Institute. Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/economics/economies-of-scale/
Kapteyn, A. (1985). Utility and economics. De Economist, 133(1), 1-20.
Mwachofi, A., & Al-Assaf, A. F. (2011).Health care market deviations from the ideal market. Sultan Qaboos University Medical Journal, 11(3), 328. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3210041/
OHE. (2006). The Economics of Health Care. Ohe.org. Retrieved from https://www.ohe.org/sites/default/files/TheEconomicsofHeathCare2007.pdf
Richards, R. (April 24, 2017). What are Demand & Supply Shifters? Sciencing. Retrieved from https://sciencing.com/demand-supply-shifters-8179335.html
Ringel, J. S., Hosek, S. D., Vollaard, B. A., &Mahnovski, S. (2002). The Elasticity of Demand for Health Care. A review of the literature and its application to the military health system(No. MR-1355-OSD).RAND NATIONAL DEFENSE RESEARCH INST SANTA MONICA CA.
Scott 2nd, R. D., Solomon, S. L., & McGowan Jr, J. E. (2001).Applying economic principles to health care. Emerging Infectious Diseases, 7(2), 282. Retrieved from https://wwwnc.cdc.gov/eid/article/7/2/70-0282_article