use the following scenario.You are a consultant and have been employed by Urban General, a large inner-city hospital, to estimate the demand for its services.Your research indicates that the income elasticity of demand for the target market is +0.50; the price elasticity of demand is -0.15; and the cross-price elasticity of demand with respect to the price of services at St.Elsewhere, a near-by hospital, is +0.35.Answer the following questions.
-The price of services at Urban General falls by 10 percent.
A)Quantity demanded at Urban General increases by 15.0 percent.
B)Quantity demanded at Urban General increases by 1.5 percent.
C)Quantity demanded at St.Elsewhere rises by 3.5 percent.
D)Quantity demanded at St.Elsewhere falls by 5.0 percent.
E)Quantity demanded at Urban General rises by 5.0 percent.

Question

Quizplus · Accepted Answer

The price elasticity of demand (-0.15) indicates that a 10% decrease in price will result in a 1.5% increase in quantity demanded at Urban General. The income elasticity of demand is not relevant for this scenario, and the cross-price elasticity of demand with respect to St. Elsewhere's prices is also not relevant as it does not directly affect the demand for services at Urban General.

Use the Following Scenario