The article, “Understanding Price Elasticities to Inform Public Health Research and Intervention Studies: Key Issues,” by Nghiem et al., (2016) discusses the importance of applying considering price elasticity for a commodity before implementing policies that determine the rate of consumption of products in the country. The authors focus on understanding the importance of considering the level of price elasticity and inelastic demand in public healthcare to determine the effectiveness of the policies they make in an attempt of minimizing the adverse effects of consuming particular products in the United States. For example, obesity, and effects of drug abuse are problems facing the majority of people in America thus creating the importance of implementing mechanisms for addressing such challenges. As a result, the authors try to show that effectiveness of government policies in controlling the health of public depends on the ability of policy formulators to access the efficiency of price changes in demand of such commodities. For instance, the authors of the article show that the American government seeks to control the health of the public by increasing taxation and subsidies on affected products.
In the first section, the authors focus on understanding the roles that prices play in determining the effectiveness of policies in achieving the desired effects. The essential aspect of this analysis is that the authors recognize the role that price elasticity plays in ensuring that there is the existence of survival in survival for policies in achieving the set objectives. For example, increasing the level of taxation for soft drinks associated with high levels sugar capable of resulting in obesity, the impacts of this policy will be high where target customers remain sensitive to price changes of food substances. In the second section, the authors adopt elasticity if demand in measuring the effectiveness of these policies in their operations in the country as well as demand elasticity for such commodities.
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The elasticity of demand illustrates that consumers choose the combination of goods that they believe they can afford. Given these preferences, it is evident that the rate of consumption depends on the prices of commodities and the level of income that target customers can spend on buying such products (Nghiem et al., 2016). This information indicates that price elasticity is an essential element for determining the effects of taxes and subsidies on controlling the production of commodities. For example, the primary objective for exercising taxation on soft drinks is to ensure that there is an increase in prices for food substances thus determining thus controlling the consumption of such foods because of increased unaffordability. The elasticity of demand determines the rate of responsiveness of consumers to changes in prices of some goods thus determining the effectiveness of policy implementation. For instance, taxation to control the consumption of fast foods and unhealthy drinks will depend on whether consumers are sensitive to price changes of such related commodities.
The authors of the article increase the effectiveness of their approach by taking into consideration the different types of elasticity that are likely to influence the change expected to occur as a result of a change in the price of the affected commodities. The application of this concept reveals that people need to develop an alternative approach that people develop adequate information related to the likelihood of the effects of the policy implemented to control the consumption of soft drinks in the market (Nghiem et al., 2016). For instance, price elasticity measures the extent to which consumers change the rate of consuming a product as a result of a change in the price of the commodity. The authors of the article have applied these concepts in measuring the changes that are likely to occur in the usage of alcohol as a result of the price increase in the market. The idea of cross elasticity of demand is also essential as it determines the rate at which people change consumption of a product as a result of a change in the price of substitutes. This concept is helpful to the authors as they determine the effects of taxation and subsidies in controlling the consumption of soft drinks in the country. For example, tax increases the price of soft drinks and fast foods that are likely to cause obesity in the market thus reducing the purchasing power of the majority of people in the society. Subsidy on health product indicates that prices for healthy foods have declined thus resulting in less consumption of such products.
Though the taxation and subsidization policy appears to be effective in addressing the issues related to a public health challenge, it is evident that the authors undermine the effect of demand inelasticity originating from other factors such as high level of income. Most of the commodities perceived to be unhealthy for consumption especially fast foods are associated with an increased level of obesity in the United States. In effect, the majority of people have high income levels, and they spend their income on fast foods because of their taste and color. Under such circumstances, the market will be experiencing inelastic demand indicating that price change will not have a significant impact on the consumption rate for soft drinks. Taxation may be a viable policy for addressing these health issues, but it becomes challenging to meet the expected goals in circumstances where the level of income remains high such that people do not have to change demand and change to the using healthy foods. Effectiveness of taxation and subsidization policies will only be achieved in circumstances where people demand elasticity is high and remain unchanged in situations where there is demand inelasticity of the target commodities.
References
Nghiem, N., Wilson, N., Genç, M., & Blakely, T. (2016). Understanding price elasticities to inform public health research and intervention studies: key issues. American journal of public health, 103(11), 1954-1961.
