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1. You are employed as an economic consultant to the regional planning office of a large metropolitan area, and your tasks is to estimate the demand for hospital services in the area. Your estimates indicate that the own-price elasticity of demand equals AO.25, the income elasticity of demand equals 0.45, the cross-price elasticity of demand for hospital services with respect to the price of nursing home services equals of demand for hospital services with respect to the price of nursing home services equals AO.1, and the elasticity of travel time equals-0.37.
a. Average travel time to the hospital diminishes by 5 percent due to overall improvements in the public transportation system.
b. The price of nursing home care decreases by 10 percent.
c. Average real income decreases by 10 percent.
d. The hospital is forced to increase its price for services by 2 percent.
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