A free market economy is a market where price is determined by the unregulated interchange of supply and demand (Wikipedia 2006). This free market economy allows American citizens, rather than government, to make decisions regarding economic activities and transactions. This allows businesses the luxury of providing goods or services at a cost that would benefit them financially. The business must decide whether to increase or decrease the price of a good or service in order to increase revenue. The City of Houston used the price of elasticity of demand by raising immunization prices with the intention of increasing revenue.
Products, Services, and Prices in the Free Market Economy
The City of Houston Health Department officials had to face a challenging dilemma. The immunization coverage rates were below standard. Children were not being immunized and the well being of the children were being compromised. Then the prices of the vaccines were to be raised by the supplying vendor. The City of Houston Health Department had to address the fact that children were not being immunized and the cost of the vaccines increased. The officials had to face the problem of costly vaccines and the risk of the immunization coverage rate to drop even lower. The price elasticity of demand would show that the service of providing shots will be highly elastic. The City of Houston officials would need to increase the cost of providing the shots to compensate the increase cost of the vaccines from the vendor. This would result in an even lower immunization coverage rate. The price elasticity of demand would be that the increase cost of providing shots will greatly decrease the immunization coverage rate. The revenue from the shots would decrease as a result.
In January 2005, the cost of immunizations went from three dollars to $15.OO dollars (City of Houston 2006). That is a dramatic increase. The City of Houston Health Department officials decided... [continues]
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