If the short-run price elasticity of demand for hospital care is 0.27,then the long-run price elasticity is expected to be:
A)greater than 0.27.
B)greater than 1.
C)less than 0.27.
D)equal to 0.27.
E)less than zero.

Question

Quizplus · Accepted Answer

In the short-run, demand for hospital care may be relatively inelastic due to the urgency and necessity of medical care. However, in the long-run, consumers may have more options for alternative health care options or preventative measures to reduce the need for hospital care. Therefore, the long-run price elasticity of demand for hospital care is expected to be more elastic (or responsive to changes in price) than the short-run elasticity of demand. This means that the long-run price elasticity is likely to be greater than 0.27. Choice A is the only option that reflects this expected relationship.

If the Short-Run Price Elasticity of Demand for Hospital Care