Health Economics

  • Goods or services whose demand rises or falls as the price of another good rises or falls. The cross-elasticity of demand is positive. They tend to be goods that serve similar purposes. To take an extreme example, in some markets you can buy 'Aspirin', which is a protected name and is owned by the German company Bayer AG. In other markets, you can get generic aspirin under the name 'aspirin'. Aspirin sells at a higher price than aspirin. So chemically identical goods - perfect substitutes (unless you prefer your medicines to be initially capped) - do not always cost the same and the higher-priced version still finds buyers, in the (sometimes mistaken) belief that a higher price signals higher quality as well as for other reasons.