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(12 points) Suppose you are collecting data from a country like Japan where the government sets the price of health care. Each prefecture in Japan has a different set of prices. Data from 1999 are displayed in the following table: Outpatient visits 1 per month 2 per month Price per visit Region Tokyo Hokkaido 25 yen 15 yen a. What is the arc price elasticity of demand for health care in Japan based on these data? b. Suppose that incomes are generally much higher in Tokyo than in Hokkaido. Is the correct demand function more elastic or more inelastic than your answer to the previous question? Justify your answer. c. Using your estimated elasticity from part a, what would the demand for health care be if the price in Tokyo were raised to 30 Yen per visit? d. Using your estimated elasticity from part a, what would the demand in Hokkaido be if the price were lowered to 5 Yen per visit?
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