Question

This is a little long, but I need help figuring it out. I see other questions close to this one, but not exactly, so I'm confused.

Suppose you are collecting data from a country like Japan where the government sets the price of health care. Each prefecture in Japan has a different set of prices.

-Table 2.2 Outpatient utilization in Tokyo & Hokkaido, 1999

Region: Oupatient visits Price per visit

Tokyo 1.25/month 20 yen

Hokkaido 1.5/month 10 yen

A) What is the arc price elasticity of demand for healthcare consumers in japan?

B) Suppose that incomes are generally much higher in Tokyo than Hokkaido. Is your answer to the last question an overestimate or underestimate of price elasticity? Justify your answer.

C) Using your estimated elasticity, what would the demand for health care be if the price in Tokyo was raised to 30 yen per visit? What would the demand in Hokkaido be ifthe price were lowered to 5 yen per visit?

D) Calculate the price elasticity of demand for health care in Japan using only data from year 2000:

Tokyo 1.0/month 30 yen

Hokkaido 1.2/month 15 yen

E) use data from both years to calculate the elasticity of demand for health care for each city seperately.

F) Using your estimated elasticities, what would the demand for health care in each prefecture be if the price were raised to 60 yen  per visit next year for coth cities?

G) Combine the estimates to get a single esti,ate of the price elasticity of health care demand for all of Japan. Assume that Tokyo is 5 times the size of Hokkaido.

***I know this is long, but I do need help and understanding on this. Thank you!!

Answer 1

Part-4) є,- 1.0- 1.230+ 15 30-15 1.0 1.2 0.273 Part-5 Tokyo Hokkaido = (Qa-h) (Path) 305 03) 1.0 1.25 30-20 30+20 1.0+1.25 1.2 1.515 10 15-101.2 +1.5 0.556 0.556 Part-6 when the price of doctor visits were increased from 60 U in 2001 in Tokyo, it would indicate a 100% rise over the price of 30 U in 2000. Applying estimate of demand elasticity in Tokyo vields a predicted fall in demand of 100% * 0.556 55.6% from year 2000 demand levels. It gives a predicted 1.0 * 0.444- 0.444 visits per month in 2001 in Tokyo. When the price of doctor visits were increased from to 60 U in 2001 in Hokkaido, this, it would indicate 300% increase over the price of 15 U in 2000. Using the similar approach demand elasticity in Hokkaido yields a predicted fall in demand of 300%*-0.556-166.7% from year 2000 demand levels. Thus predict no outpatient visits at all in Hokkaidoin 2001 Although it is very unlikely; this result tells the limitations of assuming a constant elasticity Part-7)3- When P5P 0.556