the cost of health care premiums increase from $6,000 per year to $6,600 for tho

Question

the cost of health care premiums increase from $6,000 per year to $6,600 for those under 50 years of age. As a result, the number of people under 50 years of age with health insurance decreases from 1,000 to 950.

1.) What is the percentage change in price? Instructions: If you are entering a negative number, be sure to use a negative (-) sign. %

2.) What is the percentage change in quantity demanded? Instructions: If you are entering a negative number, be sure to use a negative (-) sign. %

3.)Is the demand for health insurance elastic or inelastic?

4) How can you tell if a good is elastic or inelastic?

A.Law of Demand

B.If the price elasticity is greater than 1, the price elasticity is inelastic.

C. As price increases quantity demanded increases.

D. If the price elasticity is less than 1, the price elasticity is inelastic.

Explanation / Answer

1. % change in price = [(6600 - 6000) / 6000] * 100 = 10%

2. % change in quantity = [(950 - 1000) / 1000] * 100 = -5%

3. Elasticity of demand = -5% / 10% = -0.5

The absolute value is 0.5. Since elasticity of demand is less than 1, the demand for health insurance is inelastic.

4. Ans: If price elasticity is less than 1, the price elasticity is inelastic.

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