Why do people demand health care? The simple answer is that they want to be healthy. This desire to remain healthy has led to a continuous growth in the demand for health care. However, there are also a number of specific reasons why the demand for health care has expanded so dramatically in developed countries over the last 40 years:

Changes in the age structure
Increasing real incomes
Improvements in medical technology

Let's look at these in more detail.

Changes in the age structure of the population have increased the demand for health care. Countries like the UK have an ageing population.

Elderly people require more health care than other age groups. For instance, in 1998/99, 39% of NHS hospital and community health services expenditure was used for treating people aged 65 and over, even though they are only 16% of the total population. Only 11% of the population were 65 or older when the NHS was founded in 1948.

Increasing real incomes

Increasing real incomes have led to an increase in people's expectations of health care. Many of us are now not prepared to put up with the pain, discomfort and lack of mobility associated with afflictions like severe osteoarthritis of the hip - we demand a hip replacement operation. In the USA, people suffering from mild osteoarthritis of the knee often have an operation rather than give up playing golf.

Improvements in medical technology

Improvements in medical technology have continuously increased the range of treatments possible. A good example of this is the way in which the development of kidney dialysis machines has largely prevented kidney failure from killing people. As well as new and more effective medicines allowing us to treat conditions which were previously incurable, many new treatments now make chronic diseases like asthma manageable for patients, enabling them to have a good quality of life.

The other side of the scarcity equation relates to the finite nature of resources. The term 'resources' covers all inputs used to produce goods and services. Economists also refer to these as the factors of production. They are divided into four categories:

1. land - the physical resources of the planet including mineral deposits
2. labour - human resources in the sense of people as workers
3. capital - resources created by humans to aid production, such as tools, machinery and factories
4. enterprise - the human resource of organising the other three factors to produce goods and services.

We can see all four factors at work in the production of health care

It is fairly obvious that the available quantity of these factors is limited, therefore there is some maximum quantity of health care that can be produced at any one time. We can explore this idea theoretically by using what economists call a Production Possibility Frontier (PPF).

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