Elasticity of the Hearing Aid Market
An estimated 31 million people in the nation today have some sort of hearing loss, but only 7.3 million take initiative to actually use hearing aids. To find the market penetration for hearing aids, one must calculate the number of hearing users divided by the number of people with hearing loss (7.3/31) – which is about 23.6%. Therefore, every four customers that need hearing aids, only one will actually buy them.
To find a way to expand the hearing aid market, it may seem logical to merely reduce prices. Initially, consumers might use price to simply determine the quality of the product; therefore, when quality is linked with higher prices, price can become an incentive to buy. On the other hand consumers might buy a greater amount of the product at lower prices and less at higher prices, with all others held equal. Therefore, is the demand curve for this market expected to be inelastic or elastic?
7 comments:
The demand isn't inelastic. If it was, the cost of hearing aids wouldnt matter and consumers would purchase them no matter what the price. Since only 7.3 million people use hearing aids the change in the price of hearing aids obviously plays a huge factor in who can purchase them.
I would have to agree with what David said, but just to add to it, it seems that the buyers are price sensitive because if they weren't lots more people in need of hearing aids would be buying them. Also, I think that in this case, the hearing aid is a normal good, because more people in need of a hearing aid would buy them if their income increased.
If demand goes up when prices are down and down when prices are up, then this means that the price is elastic because the price and quantity are greatly effected by one another.
In my opinion, I think that the demand curve for the market of hearing aids would be inelastic. Hearing aids are very necessary and I think that people who have hearing loss that need hearing aids would pay any price for them because they have such a significant effect on that person's life.
It is hard to tell, to me, whether the market is inelastic or not. On one side, only a fourth of people with hearing loss have hearing aids. This may be related directly to price of the product. So then if price were to reduce, hearing aid purchases may rise, making the market for the product elastic. On the other hand, maybe people that have not already bought a hearing aid simply do not want them to begin with because it might make them feel uncomfortable so then it would not matter to them whether the price rose or dropped. Also, this product may be very important to the people that need the product so it would not matter to them what the price was, making the market inelastic.
In this case, the demand seems elastic because it reacts sensitively to the price. Price can be an important factor, not only in the U.S. but also in China. Maybe I should say price plays a more vital role in the purchase of hearing aid in China. For some poor families, they pay with their wages earned in 1 or 2 months for a hearing aid for their children, because children need to hear for education. There was a famous Chinese movie in the past few years called “Pretty Mother”. It tells a story about a laid-off mother had to work days and nights and suffered from a lot of difficulties to earn money to buy her child a hearing aid. Clearly, high price really prevents some hearing disabled people from buying hearing aid.
However, I think this is just a simplified scenario, because there may be more factors that affect the purchase of hearing aids. Like, why are hearing aid products so expensive? It is because they need high costs to be produced. But to lower the cost of production is not something that easy, because it requires new technology.
Also, some people choose not to buy hearing aid may be because they do not want to admit they have hearing problems. They want to pretend they are normal people and they do not want to be recognized as disabled just by looking at their ears. So to enlarge the hearing aid market does need new technology not only to lower the costs of production but also to make its size smaller so that the person who buys it can hide it in his ear and nobody would see it.
I agree with David, in that the demand for hearing aids is elastic. If prices were to decrease, many more people would purchase the products. Another aspect that one should consider about the market for hearing aids is the consumers. Primarily, people who are in need of hearing aids are the elderly and many of them are not enrolled any any private health insurance plan. As part of the government's health policy, the elderly have access to health insurance through Medicare, which many times, does not offer many choices to it's clients because of insufficient funds. It is very possible that many people are unable to purchase hearing aids because Medicare was unable to cover the necessary costs.
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