. Choose the correct answer and provide an explanation. 2 correct answer + 3 exp

Question

. Choose the correct answer and provide an explanation. 2 correct answer + 3 explanation = 5 points



Suppose drug companies come out with new wonder-drugs capable of curing the common cold. What is the most likely effect on the demand for physicians' services?

A. The demand will become more elastic.
B. The demand will become more inelastic.
C. The demand will decrease if government or private insurance pays all or most of the physicians' fees.
D. The demand will increase if the drugs can only be obtained with a physician's prescription.
E. The demand will not change, though the quantity demanded almost certainly will.

Explanation / Answer

D, because if a prescription is needed, it makes the wonder drug and the doctors visit complimentary goods, instead of substitutes, and the increase in the quantity demanded of the wonder drug will lead to a subsequent increase in the demand for doctors visits.

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