Recession affects the income of the citizens which results in the reduction of demand for additional services such as healthcare, recreational, and luxurious goods. During the period of recession, people can only meet their basic needs. The industries that offer additional services decrease their income and some are closed down as a result of the low demand in the facilities. These industries gain stability after the world has recovered from the recession. Further, many people withhold their money in banks and other investments but opt to spend on the basic facilities such as food, clothing, and shelter. The changes in the citizens’ preferences occur due to a decrease in their income.
People perceive that health services are secondary needs. In this case, we will look at the demand for healthcare services in the NIH (National Institute of Health). During the 2008-2009 world recession, the demand for health facilities in the NIH had decreased. The income of the citizens had reduced which led to the reduction in the demand for additional facilities. There was an increase in the registration in the insurance facilities because people did not want to spend money on health services. The citizens gave priority to their primary needs due to the change in their preferences. The change in the demand for health facilities, in this case, has been brought by the changes in the income of citizens. The prices of the health services were still constant which resulted in the stability of the quantity demanded.
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The Difference in the Change in Demand in the Product Market and Change in Quantity Demanded
A change in the quantity demanded is as a result of the price changes. It causes movements along the demand curve. The major element that affects the quantity demanded is the price. In case the cost of an orange is $ 1 per euro among the local sellers, but the quantity demanded at this cost is 100 oranges. The next day the retailers will increase the cost of the oranges to $ 2 per euro but the quantity demanded will reduce to 50 oranges. The increase in the cost of the oranges from $ 1 to $ 2 per euro resulted in the reduction of the quantity demanded along the demand curve.
The factors that cause a change in the demand include income, age, sex, and personal identity but the price of the products remains constant. These elements cause a shift in the demand curve. The other elements that lead to a shift in the demand curve include the change in nature, an introduction of substitute products or external factors. The factors that lead to a shift in the demand curve can increase or decrease the quantity demanded. For instance, in case the oranges are found to cause health problems due to the chemicals that are used it will result in the reduction of quantity demanded to 20 oranges but the price will remain to be $ 1 per euro.
In conclusion, the purchasing power of the citizens reduces during the period of recession due to a reduction in their income. People prefer to meet their primary needs rather than the secondary facilities. The great recession decreased the income of the American citizens which led to the decrease in the demand but the quantity demanded remained constant. A change in the quantity demand is brought by the changes in the prices of the products. A change in the demand is caused by a change in the income, age, preferences, sex of the consumers. It leads to shifts in the demand curve.
