If the demand for health care is elastic and health care co-payments are lowered, the percentage change in the quantity demanded of health care will be _______________ than the percentage decrease in co-payments, and the total dollar amount spent on health care will ___________.
A)greater; rise
B)less; rise
C)greater; fall
D)less; fall

Question

Quizplus · Accepted Answer

When demand is elastic, a decrease in price (or co-payments, in this case) leads to a proportionally larger increase in the quantity demanded. Therefore, the total expenditure on health care increases because the effect of the increased quantity demanded more than offsets the effect of the lower price.

If the Demand for Health Care Is Elastic and Health