When the price of a good falls, we know exactly what will happen to consumer spending...

When the price of a good falls, we know exactly what will happen to consumer spending on that good. True or False? Explain.

Is the demand for hospital services inelastic or elastic? Explain.

Briefly explain why indifference curves cannot intersect.

If nurse practitioners and primary care physicians were perfect substitutes, what would you expect to be their wage differential?

Other things being equal, if the demand for physician services suddenly became more inelastic, how would that affect consumer surplus?

Expert Solution

True, when the price of a good fallswe know the consumer spending will increase other things remaining constant as the fall in price will make the consumer to spend more.

Demand for hospital services is inelastic as it is necessary service for a consumer to save his/her life and even if price changes one has to avail the service.

The indifference curves cannot intersect each other. It is because at the point of tangency, the higher curve will give as much as of the two commodities as is given by the lower indifference curve which is impossible.

If nurse practitioners and primary care physicians were perfect substitutes, the difference in their wage will be negligible as patient can go to other if one charges higher than other.

Other things being equal, if the demand for physician services suddenly became more inelastic, then the consumer surplus is infinite as change in price does not change the demand.

Rahul Sunny answered 6 months ago

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