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Irina18 [472]
3 years ago
15

. The income elasticity of demand for medical care is 1.35. This implies that: a. if income decreases by 1%, the quantity demand

ed for medical care decreases by 1.35%. b. if the price of medical care increases by 1%, the quantity demanded for medical care decreases by 1.35%. c. if the income of the average consumer increases by 1 dollar, the quantity demanded for medical care will increase by 1.35 units of care. d. if income increases by 1%, the quantity demanded for medical care decreases by 1.35%.
Business
1 answer:
Andre45 [30]3 years ago
5 0

Answer:

The correct answer is a).

Explanation:

The income elasticity of demand refers to the percentual variation of quantity demanded of a certaing good in response to a percentual variation in income.

If the income elasticity of demand for medical care is 1.35,

<em>a. if income decreases by 1%, the quantity demanded for medical care decreases by 1.35%.</em> TRUE, this is what the definition implies.

<em>b. if the price of medical care increases by 1%, the quantity demanded for medical care decreases by 1.35%. </em>FALSE. In this elasticity, the sign is relevant. This income elasticity implies that changes in income and medical care expenses have the same sign.

<em>c. if the income of the average consumer increases by 1 dollar, the quantity demanded for medical care will increase by 1.35 units of care.</em> FALSE. The elasticity relates percentual variations, not absolute value variations.

<em>d. if income increases by 1%, the quantity demanded for medical care decreases by 1.35%.</em> FALSE. The same as point b.

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