Question 1:

Use a graph to illustrate how the following changes could affect the demand curve for inpatient services at a hospital in a large city.

A number of physicians in the area join together and open a discount-price walk-in clinic; the cross-price elasticity of demand between physician services and inpatient hospital services is: -0.50

Question 2

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

a.Interpret: a price elasticity of demand of -0.15

b.Interpret: an income elasticity of demand for the target market of +0.50

c.Interpret the cross price elasticity of demand of +0.35

d.What does this (c) above imply about the relationship between Urban General hospital and St. Elsewhere?