Question

Refer to the graph below to answer the following question:

Suppose physician services and inpatient services are substitutes. Now, suppose a number of physicians in the area join together and open up a discount-price walk-in clinic. Then the demand curve for inpatient hospital services shifts to the right from D1 to D2 because physician services and inpatient services are substitutes in consumption. The equilibrium price will increase from P1 to P2 and the equilibrium quantity will increase from Q1 to Q2.

TRUE OR FALSE

Graph in picture below

Refer to the graph below to answer the following question: Suppose physician services and inpatient services are substitutes. Now, suppose a number of physicians in the area join together and open up a discount-price walk-in clinic. Then the demand curve for inpatient hospital services shifts to the right from D1 to D2 because physician services and inpatient services are substitutes in consumption. The equilibrium price will increase from P1 to P2 and the equilibrium quantity will increase from Q1 to Q2. Answer: The P1 D2 D1 0 01 02

Answer 1

False

Since physician services and inpatient services are substitutes that means if the price of one decrease, the price of other remaining unchanged , the quantity demanded of the other decreases.

People will prefer to spend their money on good that are less expensive. Thus a discount walk in clinic will be cheaper than inpatient hospital. So the demand curve for physician services will increase while the demand curve for inpatient hospital will decrease.

When the price of substitute good x increase people will prefer to buy it's substitute good say y as it will be comparatively cheaper than good x and vice versa. Thus a discount walk in clinic of physician services will increase its demand and reduce the demand of inpatient hospital.