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Suppose the equilibrium price for an average hospital stay in the absence of insurance is $10,000. At that price, 1000 people are hospitalized each year.

Suppose the equilibrium price for an average hospital stay in the absence of insurance is $10,000. At that price, 1000 people are hospitalized each year. Now suppose an insurer offers a policy to lower the out of pocket price of a stay to $100, and at that price, 1200 people are hospitalized.

Is the demand for hospital care elastic or inelastic?

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