You Are a Consultant and Have Been Employed by a Large

question 4

Multiple Choice

You are a consultant and have been employed by a large inner-city hospital called 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 Rural Hospital,a near-by hospital,is +0.35.Answer the following questions.
The price of services at Rural Hospital falls by 10%.What happens to the quantity of services demanded at City Hospital?

• A)Quantity demanded rises by 35.0%
• B)Quantity demanded falls by 3.5%
• C)Quantity demanded falls by 1.5%
• D)Quantity demanded rises by 5.0%
• E)Quantity demanded stays the same