Question

Suppose that identical twin eye doctors work across the hall from each other. Even their parents have trouble telling them apart. Moreover, they both went to the same medical school. From this information, we would guess that the price elasticity of demand for either of their services is closest to unitary. True, false and why?

Answer 1

Answer:

False

Explanation:

The statement is false: because

As provided the doctors are identical and even there parents cannot differentiate properly and are mistaken sometimes.

As the doctors practice across the hall, that is the same place, any customer if there is an increase in fee of Doctor 1 will substitute his doctor, into another, as both are common with knowledge, and practice.

This will lead to fall of customers or patients at a change of fees, to another doctor.

Thus the price elasticity of demand is infinite, as all customers might be loosed.

Therefore, the statement is false.