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:
what will be the average real income decreases by 10 percent?
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Expert's answer
2019-07-05T09:07:53-0400
If the average real income decreases by 10 percent, then the quantity demanded for services will decrease by 10%*0.45 = 4.5%.
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