With the rapid anthropomorphism of pets, many households now treat companion animals as full family members. To manage the rising costs of advanced veterinary medicine, a significant proportion of owners purchase comprehensive, lifetime pet insurance policies. These insurance products typically cover up to 90% of specialized treatments, such as hydrotherapy, MRI scans, and oncology services, leaving the consumer to pay only a small co-payment.
Because pet insurance shields the owner from the bulk of clinical fees, the price elasticity of demand for advanced veterinary procedures is often very low. Conversely, the income elasticity of demand for premium pet care options—such as luxury boarding suites, organic raw-food diets, and elective holistic wellness therapies—is likely to be high. As household incomes rise, families readily upgrade from basic pet care to these high-end services, driving substantial growth in the veterinary and pet-services sectors.
Distinguish between price elasticity of demand and income elasticity of demand, and analyse why, when advanced veterinary care is heavily covered by insurance schemes, the price elasticity of demand for these medical services might be 'very low' while the income elasticity of demand for premium pet care options is 'likely to be high' (Extract G, paragraph 2).
256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.