Principles of Economics (Second Edition)
Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393623826
Author: Lee Coppock, Dirk Mateer
Publisher: W. W. Norton & Company
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Chapter 18, Problem 4QFR
To determine

To explain:

The reason for marginal product of medical care declines as medical expenditures rise.

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Demand falls by 5 percent for every 10 percent increase in price health care services. How much is the won price elasticity of demand for health care?
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The price elasticity of demand for health care has been estimated to be −0.2. Characterize this demand as price elastic, unit price elastic, or price inelastic. The text argues that the greater the importance of an item in consumer budgets, the greater its elasticity. Health-care costs account for a relatively large share of household budgets. How could the price elasticity of demand for health care be such a small number?
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