Assessment of the Price Elasticity of Demand for Veterinary Services: A Case Study of the University of Zambia Veterinary Hospital

Abstract

Developing a price policy that ensures financial viability in order to continue providing a service. The same is true for veterinary services whose economic nature has to be understood for practitioners to adjust prices for smooth income flows to the business. However, veterinary practitioners’ prices often vary across practices without a clear understanding of the economic nature of animal healthcare or elasticity of demand for the services they provide. This study, therefore, aimed to assess the price elasticity of demand for veterinary services using the University of Zambia Veterinary Clinic (UNZAVET) as a case study. To meet this objective, historical five-year data (2014-2018) was collected from the clinics’ medical and financial records. The data was then entered and analysed using both Microsoft Excel and IBM SPSS Version 20. The price elasticity of demand was calculated using an end-point method. The association between inflation rate and revenue was estimated using Simple Linear Regression Analysis. Overall, the results showed that most of the services offered at UNZAVET were relatively inelastic (<1). However, demand for the services gradually declined while total revenue was steadily increased due to the overall increase in prices. The study demonstrated that the country's inflation rate had a direct effect on the rise in prices and a decline in demand for animal health services. There was no significant statistical association (p=0.35) between annual revenue and inflation rate, nevertheless, a unit increase in inflation reduced income by K29, 815.81 (≈$2000) per annum. The study concludes that prices for veterinary services are traded in monopolistic competition, with mostly inelastic commodities. The study recommends that Veterinarians should consider inflation and price elasticity of demand for each animal health commodity before changing prices. Veterinary practitioners must know that within their practice, there are some veterinary services that if you raise their price, consumers will still buy the same amount, and practitioners will make more money. Similarly, there are other commodities which if practitioners lowered their prices; consumers would buy more hence increasing their income on such services.