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Assume that the demand for plastic surgery is price inelastic
Assume that the demand for plastic surgery is price inelastic. Are the following statements true or false? Explain your answer
a) When the price of plastic surgery increases, the number of operations decreases.
b) The percentage change in the price of plastic surgery is less than the percentage change in quantity demanded.
c) Changes in the price of plastic surgery do not affect the number of operations.
d) Quantity demanded is quite responsive to changes in price.
e) The marginal revenue of another operation is negative.
Expert Solution
a) True. According to the law of demand, the number of plastic surgery demanded will fall when price increases.
b) False. Since demand for plastic surgery is price inelastic (the elasticity is less than 1), then the percentage change in quantity of plastic surgery is less than the percentage change in price of surgery.
c) False. Demand for plastic surgery is price inelastic, but not necessarily perfectly inelastic. The price will not affect the number of surgeries only if demand for plastic surgery is perfectly inelastic.
d) False. Inelastic demand implies that the changes in quantity demanded are small given price changes.
e) False. The marginal revenue of the next operation will be positive. Since demand for plastic surgery is price inelastic, the doctor most likely can perform another operation even when the price is increased, and therefore, increases revenue.
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