Assume the demand for plastic surgery is price inelastic. Are the following stat

Question

Assume the demand for plastic surgery is price inelastic. Are the following statements true of false? Explain.

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 effect the number of operations.

d. Quantity demanded is quite responsive to changes in price.

e. If more plastic surgery is performed, expenditures on plastic surgery will decrease.

f. The marginal revenue of another operationis negative.

Explanation / Answer

If the demand of plastic surgery is price inelastic it means any proportionate change in price will either reduce or increase the quantity demand of plastic surgery less than change in price. Thus,

(a) If the price of plastic surgery increases, the number of operations decreases.TRUE, although operations will reduced less proportionately than increse in price.

(b) The percentage change in the price of plastic surgery is less than the percentage change in quantity demanded. FALSE because inelastic means percentage change in QD is less than Percentage change in price.

(c) Changes in the price of plastic surgery do not effect the number of operations. FALSE. Price elasticity is not perfectly inelastic but inealstic.

(d) Quantity demanded is quite responsive to changes in price. TRUE.

(e) If more plastic surgery is performed, expenditures on plastic surgery will decrease. FALSE as it is irrelvant with price elasticity.

(f) The marginal revenue of another operation is negative. FALSE it may be positive as well.

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