In Japan, the government sets the price of healthcare. Each prefecture has a different set of...

  

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In Japan, the government sets the price of healthcare. Each prefecture has a different set of prices, so that for example, Tokyo has higher prices than Kumamoto. Suppose we know the following outpatient care price and utilization in Tokyo and Kumamoto in year X: Price per visit Outpatient visits 20 Region Tokyo Kumamoto 10 12 15 1. Using the above data, what is the point price elasticity of demand for outpatient visits in Japan? Is your solution unique? Explain. 2. Using the above data, what is the arc elasticity? Is it unique? Compared with the value of point elasticity, what do you find? 3. Income is generally higher in Tokyo. Would your estimate from question 1 overestimate or underestimate the real price elasticity in Tokyo (in terms of the absolute value)? Please draw a graph and explain. In Japan, the government sets the price of healthcare. Each prefecture has a different set of prices, so that for example, Tokyo has higher prices than Kumamoto. Suppose we know the following outpatient care price and utilization in Tokyo and Kumamoto in year X: Price per visit Outpatient visits 20 Region Tokyo Kumamoto 10 12 15 1. Using the above data, what is the point price elasticity of demand for outpatient visits in Japan? Is your solution unique? Explain. 2. Using the above data, what is the arc elasticity? Is it unique? Compared with the value of point elasticity, what do you find? 3. Income is generally higher in Tokyo. Would your estimate from question 1 overestimate or underestimate the real price elasticity in Tokyo (in terms of the absolute value)? Please draw a graph and explain.

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1 The point price elasticity of demand for outpatient visits in Japan can be calculated using the following formula Point Price Elasticity of Demand C... View the full answer