You are employed as an economic consultant to the regional planning office of a large metropolitan area, and your task is to estimate the demand for hospital services in the area. Your estimates indicate that the own-price elasticity of demand equals –0.35, the income elasticity of demand equals 0.10, the cross-price elasticity demand for hospital services with respect to the price of nursing home services equals –0.15, and the elasticity of travel time equals –0.22. Use this information to project the impact of the following changes on the demand for hospital services.
a. Average travel time to the hospital goes down by 10% due to improvements in the public transportation system. b. The price of nursing home care decreases by 10%.
c. Average real income increases by 4%.
d. The hospital is forced to increase its price for service by 10%.