Question

object O Select all wing time Insert Editing 1. 2. - 3 5 + You are employed as an economic consultant to the regional planning office of a large metropolitan area. A recession has caused the hospitals in the city to consider raising prices. You know that the price elasticity of demand for hospital services equals -0.25, and the income elasticity of demand equals +0.45. Given this information, tell how the quantity demanded for services will change if The hospitals increase the price for services by 2 percent A Quantity demanded for services will decrease 0.5% B.Quantity demanded for services will decrease 0.45% I C.Quantity demanded for services will decrease 0.25% D. Quantity demanded for services will increase 0.23%

Answer 1

Ans) Price elasticity of demand is the responsiveness of quantity demanded to change in price. It always carries a negative sign, which shows that price and quantity demanded are inversely related i.e if one increases then the other decreases and vice versa.

Price elasticity = %change in quantity demanded ÷ %change in price

object O Select all wing time Insert Editing 1. 2. . 3 5 You are employed as an economic consultant to the regional planning office of a large metropolitan area. A recession has caused the hospitals in the city to consider raising prices. You know that the price elasticity of demand for hospital services equals -0.25, and the income elasticity of demand equals +0.45. Given this information, tell how the quantity demanded for services will change if The hospitals increase the price for services by 2 percent E=%AQ Quantity demanded for services will decrease 0.5% % AP -0.25=%DO B.Quantity demanded for services will decrease 0.45% C.Quantity demanded for services will decrease 0.25% -0.25x2=%AQ % AQ=-0.5 ie. 0.5% decrea D. Quantity demanded for services will increase 0.25%