Other Things Equal, and Given That the Elasticity of Demand

question 143

Multiple Choice

Other things equal, and given that the elasticity of demand for health care is 0.2, a 10 percent increase in the price of health care in the United States will reduce the quantity of health care demanded by about

• A)1 percent.
• B)2 percent.
• C)5 percent.
• D)20 percent.

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Definitions:

Private Cost

The expenses that a company or an individual incurs as a result of its economic activity, excluding any external costs.

Private Value

The value of a good or service to a particular buyer or group of buyers, which may differ from its market price or the value to other buyers.

Deadweight Losses

Economic inefficiencies that occur when supply and demand are not in equilibrium, usually due to government intervention like taxes or subsidies.

Tax On Gasoline

A government-imposed charge on the sale of gasoline, typically used to fund transportation infrastructure or environmental projects.