Exploring Veterinary Economics

Exploring Veterinary Economicsis a series of articles addressing a variety of economic issues facing the veterinary profession. The series began in early May 2013 and new articles are posted every 2-3 weeks.

The Role of Economics

What is Economics and how do its concepts apply to you? You may think that economics is about money or data, but it is really about making choices.

Profit Margins

What is a fair profit? Is this even the right question? Are there other financial indicators we should consider to get satisfactory financial performance?

Strategies for Pricing, Part 4

Strategies for Pricing, Part 4, considers the role of economies of size in reducing the cost per unit of service and thus increasing profitability. Economies of size are an important component of any decision regarding capital expenditures.

Strategies for Pricing, Part 3

Strategies for Pricing, Part 3, focuses on the use of bundling and creating loss leaders, strategies based on the consumers’ perceptions of pricing and their willingness to pay for veterinary services.

Strategies for Pricing, Part 2

This article continues the previous article's discussion of pricing strategies (Strategies for Pricing, Part 1) and explores the impact of price and income elasticity of demand on profits and revenues. Read more to find out how you can determine whether to raise or lower prices in order to meet a target profit margin.

Strategies for Pricing, Part 1

Determining what to charge for each service should be part of a business strategy. Developing a strategy for price setting depends on many factors, some unique to the services and some unique to the practice. This article discusses the "earns" and "turns" business strategies and how they relate to pricing. This article is the first of several articles that are forthcoming on pricing.

Turning Need Into Demand

No one denies that the world needs more veterinary services than are currently available. Then why aren’t those services in higher demand? The reasons can be explained by understanding the factors that affect the quantity demanded and the factors that affect demand.

Lowering Interest Rates on Student Loans

In this week’s article we discuss the effects of changing interest rates on the supply of money in the economy. Learn about the impact of lowering interest rates on student loans and what effect it has on the veterinary profession.

Supply in the Veterinary Services Industry

The primary occupational function of veterinarians is to provide veterinary services. However, to get to a position of providing (supplying) those services, veterinarians must navigate through the three vertically-related markets. This article sums up what is meant by the term “supply” in each of the three markets for veterinary services and describes how prices coordinate supply decisions across those markets.

The Market for Veterinary Services

The market for veterinary services is the final piece of the puzzle in connecting the three-vertically related markets comprising the veterinary profession, i.e., the market for veterinary education, the market for veterinarians, and the market for veterinary services. Learn about the relationship between the market for veterinary services and the other vertically-coordinated markets and how these markets are guided by price.

Horizontally-Related Markets for Veterinarians

The veterinary profession is comprised of three vertically-related but independent markets—the market for veterinary education, the market for veterinarians, and the market for veterinary services.

The Market for Veterinarians

As we have learned through a series of articles, the veterinary profession comprises three vertically-related, independent markets--the market for veterinary education, the market for veterinarians, and the market for veterinary services. This article investigates the market for veterinarians.

The Market for Veterinary Education

To continue the theme of interrelated veterinary markets, the market for veterinary education, the market for veterinarians, and the market for veterinary services, this week's article describes the independent functioning of the market for veterinary education.

Needed Information for Market Efficiency

The latest Exploring Veterinary Economics article explores how the information on the cost of a veterinary education and other factors would help produce an efficient competitive veterinary services market.

Coordination in the Vertically-Related Veterinary Service Markets

The market for veterinary services, like most competitive markets, comprise two or more markets that guide resources into the production of specific consumable goods and services. The veterinary service markets include the markets for veterinary services, veterinarians, and veterinary students.

The Effects of a Minimum Wage on Your Veterinary Practice

The implementation of a minimum wage affects laborers regardless of the skill level. No employee or firm is immune to the impact of an increased minimum wage. While predicting its aggregate effect on society in general is difficult, learn techniques that can be applied to identify the potential effects of this inevitable action on your practice.

Necessary Conditions for a Perfectly Competitive Market

In a perfectly competitive market producers maximize profits and consumers maximize happiness using the least amount of resources. This market “efficiency” is experienced since consumers only pay for the cost of the actual product and not the cost to market the product. The producers’ only bargaining tool is competitive pricing. While this market exists only in theory, the veterinary profession can use it to induce changes needed to be more closely aligned with the ideals of this perfectly competitive market.

Measuring Changes in the Market for Veterinarians

Reports of veterinary compensation have been used to indicate the changing market for veterinarians. Using simple averages can be misleading because they include the effects on compensation of changing demographic factors. A weighted average is used to control for the nonmarket factors, including demographic characteristics, such as gender, geographical location, and type of practice.

Why is Trend Important?

In this week’s article learn how the economy’s need to constantly converge to a point of equilibrium- trend, helps guide market participants in their long term strategic planning. See why trend is important and how understanding it can help your business.

What GDP Means for Client Numbers

Learn how increasing GDP growth rates coupled with income disparity can affect your practice.

How the Grinch Stole the Veterinarians’ Christmas…

As we close out the year, and in response to the season, Bridgette and I took a little liberty in the spirit of good will to write an article that deals with one of our greatest battles within the veterinary profession.

Calculating the Price Elasticity of Demand

Understanding the price elasticity of demand for products and services is crucial in effectively maximizing profits. Evidently, raising prices is not the quick fix to increasing gross revenue. Read more to find out how price elasticity of demand can directly affect your revenue.

Change in Demand Versus Change in Quantity Demanded

There is a subtle difference between the economic concepts of change in demand and change in quantity demanded. In this article, we use practical examples to illustrate this difference. Ultimately, it is critical that we understand that a change in quantity demanded is caused by a change in price; whereas, a change in demand stems from a change in other, non-price, factors such as change in income.

What’s Really Affecting Veterinary Compensation?

Over the years we have reported summary statistics of graduating veterinary students’ annual income. This article extends those studies and incorporates a time series analysis over the period 2001-2013 as well as highlights the variables that affect veterinary compensation. After controlling for the change in the number of students entering different sectors, regions, as well as the increasing amount of women entering the profession we observe the true trends of graduating veterinary students’ annual income.

Major Sources of Excess Capacity in Veterinary Services

The cause of the 12.5% excess capacity in the veterinary services industry continues to be debated. The debate should not be centered on whether it is supply or demand but rather on what the relative importance of demand, supply and price are in the creation of the current level of excess capacity in the profession. This issue of Exploring Economics looks at the role of the recession in reducing the demand for veterinary services.

Managing Prices for Profit

Because the economy is experiencing sluggish growth, knowing how to determine the best prices for services is necessary to gain the greatest profit. In this article we explore the concept of price elasticity—the relationship between price and quantity demanded. Understanding price elasticity provides valuable information to the practitioner about the effect of a price change on profit.

Supply of New Veterinarians

In the previous edition of Exploring Veterinary Economics, we examined the effect of the two new veterinary colleges (Lincoln Memorial and Midwestern) on the projections of excess capacity. In this edition long-term trend analysis is used to provide a different perspective on projected excess capacity.

Increasing the Supply of Veterinary Services above Baseline Estimates

Two new veterinary colleges are scheduled to provide new veterinarians to the workforce by 2018. This article explains the potential impacts of these additions on the veterinary workforce.

Why the Farm Bill Matters

Most of the provisions of the 2008 Farm Act (Food, Conservation, and Energy Act of 2008) were extended without change through the end of the 2013 fiscal year, crop year, or calendar year, but what would happen if no new farm bill were enacted? How would that affect the average American citizen? Dr. Dicks gives a brief summary of the history of commodity and food nutrition programs and explains why the farm bill is so important.

Is the Veterinary Services Industry Unique?

What is different about the veterinary services industry? This article compares the veterinary services output trends with other similar service industries. The article also explores factors that may contribute to a difference in the demand trends for veterinary vs. other similar service industries.

Veterinary Services Industry Trends

What will happen to the incomes of veterinarians if the growth in the number of veterinarians increases quicker than the growth in the value of veterinary services? This article depicts the trends in the veterinary services industry and provides insight about the implications of the future.

Excess Capacity or Oversupply

This article provides definitions of and the difference between excess capacity and oversupply. The three components of excess capacity are also described in detail, and Dr. Dicks explains why excess capacity is the correct term to use in the veterinary workforce study.