Economic analysis to your company - Essay Example

Due to the uniqueness in the nature of services offered to the people, medical services provided by Cleveland Clinic in Abu Dhabi will have a negative price elasticity of demand. Price elasticity of demand measures the responsiveness of demand to changes in the price of a particular good. An elastic demand occurs if a small change in the price of a service or good leads to a large change in the quantity demanded. On the other hand, inelastic demand occurs if a small change in the quantity demanded accompanies a large change in the price of a commodity.

In a free market economy, prices set the quantity of goods and services demanded. As such, if there is a decrease in the price of goods or services offered by a particular company, the market responds by increasing the quantity of goods and services, while an increase in the prices of goods and services leads to a corresponding decrease in the quantity of goods and services demanded by the market. As economists measure the elasticity of demand, they consider the level of change between price and quantity.

However, not all goods and services obey the law of demand, as Veblen argued. Special commodities such as Veblen and Geffen goods, as well as medical care services do not obey this law. Subsequently, in case Cleveland Clinic increases the prices of their medical services, there is likely to be no or insignificant changes in the number of people visiting the clinic for medical attention. Additionally, even if the clinic were to lower the price of their medical services, there would be no significant increase in the number of people visiting the clinic for medical services.

Only the sick require medical attention, a reason for this reality. Despite operating in an open market structure, Cleveland Clinic, Abu Dhabi does not have to conform to the rules of an open market structure. Competition least affects the number of people visiting the clinic. It operates as a special form of monopoly, due to the uniqueness of its services. Thus, its cost structure does not conform to the open market rules. 2. How global competition impacts Cleveland Clinic, Abu Dhabi Global competition would negatively affect the profitability of Cleveland Clinic, Abu Dhabi.

Medical services are an essential part of people’s lives. Globally, people spend large parts of their budgets seeking medical attention. Cleveland Clinic, Abu Dhabi operates under international expertise such as physicians and medical experts from North America (“Modern Healthcare” 25). In open market economies, it is not just the price of commodities, which determine the level of competition between firms. Quality also serves a big role in determining the number of people vising a medical clinic.

If Cleveland Clinic were to charge exorbitant prices against a poor service delivery system, people would opt for better hospitals charging reasonable fees for their services. Since medical attention is a special kind of service offered to the people, its market demand does not change with reference to the prices; rather, quality of service delivery is the biggest determinant. If Cleveland clinic, Abu Dhabi, due to the special services it provides to the people were to offer low quality services to the customers, nothing would stop people from seeking medical attention from other international clinics providing better medical attention.

In this scenario therefore, prices are likely to play no particular