Arc income elasticity= [Difference in visits/ Average visits]/ [Difference in in

Question

Arc income elasticity= [Difference in visits/ Average visits]/ [Difference in income/ Average income]

= [(3/4-3/2)/ (3.4+3.2)/ 2] / [(45,000-38,000)/ (45,000+38,000)/2]

= [0.2/3.3]/[7,000/41,500]

= 0.0606/0.1687

=0.36

Per capita income in Pitt County is $45,000. Per Capita Income in Chatham County is $38,000. Physician visits average 3.4 per year in Pitt County and 3.2 per year in Chatham County. If incomes rise by 5% in both counties, use the arc income elasticity to compute how physician visits will change across the two counties?

Explanation / Answer

how physician visits will change across the two counties=0.36*5%=1.80%

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