Suppose a Nurses Union successfully secured a 12 percent increase in the wages of registered nurses. If a hospital responds by reducing the quantity of registered nurses hired and increasing the quantity of physician's assistants hired, what conclusion can you draw?
A) The cross -price elasticity of demand between registered nurses and physician's assistants is positive.
B) Physician's assistants are more valuable in terms of their productivity.
C) The price elasticity of demand for registered nurses is negative while the price elasticity of demand for physician's assistants is positive.
D) The cross -price elasticity of demand between registered nurses and physician's assistants is negative.

Question

Quizplus · Accepted Answer

The hospital's response to increase the hiring of physician's assistants as a result of the wage increase for registered nurses indicates that these two types of healthcare workers are substitutes for each other. A positive cross-price elasticity of demand signifies that as the price (wage in this case) of one good (registered nurses) increases, the demand for the substitute good (physician's assistants) also increases.

Suppose a Nurses Union Successfully Secured a 12 Percent Increase