Explain the physicians in the market

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Dr. Jones, an orthopedic surgeon, estimates the own-price elasticity of demand for her services to be -2. The own-price elasticity of demand for orthopedic surgery in this market as a whole is estimated to be -0.5.

a) Why should it not surprise you that demand is so much more elastic for the services of Dr. Jones than for the orthopedic surgery market as a whole?

b) f Dr. Jones increased prices by 10 percent, all other things being equal, by how much (in percentage terms) would Dr. Jones' patient volume (i.e. quantity) change? By how much would revenue change? Please show your work/calculations. Then in words, briefly describe why Dr. Jones' revenue changed in this direction.

c) Now suppose instead that all of the physicians in the market increased their prices by 10 percent. All other things being equal, by how much (in percentage terms) would total volume (number of physician visits) change for the entire market? Would total revenue in this market increase or decrease? Briefly explain.

Reference no: EM133130789

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