Question

1. Consider demand curves for medical care with different severities of illness. 1) Suppose an individual with a mild health event has demand q=100-p. What is the price elasticity if p=50? 2) Suppose an individual with a severe health event has demand q=150-p. What is the price elasticity if p=50? 3) Given the same slopes of demand curves and the same price, why are the elasticities different?

Answer 1

las By differential equation) price elastady of derrend CpEd) is given by - 1 10 de mais - d (100-px la - 1 & hoger (100-P) Witar = 50) T – 1 x 50 (180-80) = 1 IPED b. Similely Pena d (1508) X 15o-p dp 1 x at P 15o-8 When (p.50)

- D = - 1 t. 50 (150-50) -50 IPED = -0.5 C). As We know that demord Corre is a Stright line equation with Negative Slope (m) – P. Since Y= matc & stright lin equation here, if the Calue of com' that is Slope is some for the two derard Curves but still they will not have Same PEDs The reason in due to presence of Factor '(' that is intercept which Causes change in llalue of PERS