Use the Following Scenario

question 3

Multiple Choice

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 St.Elsewhere falls by 10 percent.What happens to the quantity of services demanded at Urban General?

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

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Definitions:

Phillips Curve Tradeoff

An economic theory suggesting an inverse relationship between the rate of inflation and the rate of unemployment, indicating that reducing inflation may lead to higher unemployment rates.

Fixed Incomes

Financial investments that provide returns in the form of fixed periodic payments and the eventual return of principal at maturity.

Nominal Interest Rate

The real interest rate plus the inflation rate.

Real Interest Rate

The interest rate adjusted for inflation, providing a more accurate measure of the cost of borrowing and the real yield to investors.