e. Case study - cosmetic surgery

How well does our theoretical model of a market explain what has been going on with cosmetic surgery? Look at this newspaper report on the growth of cosmetic dentistry.

Putting your money where your mouth is

Maggie Smith is a publisher in her late 40s who has just splashed out on a £1,400 "tooth lift". "I saw the treatment as an investment. Compared with the cost of a couple of outfits, it's not that expensive and it lasts much longer".
Smith purchased her cosmetic dentistry from Dentics on London's Kings Road. Dentics opened its first "tooth boutique" four years ago and now has three London branches. Customers can walk into the shop-fronted surgeries without an appointment and browse through albums of photos showing wayward canines tamed into piano keyboards by bleaching, filing down, building with resins or covering with porcelain veneers. Each treatment costs around £200.
Primary school teacher Elizabeth Eccose-Westley regarded the treatment as an affordable luxury. "I'm not rich and I'm not vain, but at 42 I started to feel I was getting long in the tooth. I spent £1,000 on porcelain veneers, instead of a summer holiday, and it's really boosted my confidence. Give it another couple of years and people won't think twice about it. Everybody will be having it done "

Emma Brooker Guardian 16.9.93

Clearly there is a demand for cosmetic dentistry - people are willing and able to pay for it. Both the women in the article viewed the cosmetic treatment as something which gave them 'utility' , i.e. satisfaction, and they consciously compared the satisfaction gained with that from other purchases.

The article also provides evidence that the market is growing. Why is this happening?

Economic analysis

The initial supply and demand curves are shown in Figure A- the system is in equilibrium (see Figure B).

 Figure A Figure B

The first change is that technology has reduced the costs of such treatment - shifting the supply curve outwards (see Figure C). Demand also seems to be growing; why is this? According to a recent national survey, one in four people dislikes their appearance suggesting that they would consider buying this kind of treatment if they could afford it. So consumers are likely to respond to the lower prices brought about by the shift in supply - a movement down (see Figure D) the market demand curve. This sets up a new equilibrium (see Figure E) at P" and Q".

 Figure C Figure D Figure E

The next change is an increase in consumers' real income leading to an outward shift (see Figure F) in the demand curve from DD to D'D'. So there's a new equilibrium at P'" and Q'".

 Figure F

Suppliers have reacted to the growth of consumer demand in exactly the way our theory predicts. Dentics has expanded its operations by opening more shops and providing more treatments (see Figure G). There is a new equilibrium (see Figure H).

 Figure G Figure H

Reduced costs (see Figure I) and extra consumer demand (see Figure J) have both led to the allocation of more resources (see Figure K) to cosmetic dental treatment.

 Figure I Figure J Figure K

So our model has performed fairly well. But we can develop it further by introducing the concept of elasticity.