Answer Exercises 7.6, 7.7, 7.8 (page 121) and Exercises 8.1, 8.4, 8.6 (page 133). Use evidence from the reading to support your answers.
Hint: For Exercise 8.6, you need to calculate
Percent Change in visit ((new-old)/old)*100
Percent change in price ((new-old)/old)*100
Price elasticity of demand (value from percent change in visit/percent change in price)
7.6 During the last five years, average daily occupancy at the Autumn Acres nursing home has slid from 125 to 95 even though Autumn Acres has cut its daily rate from $125 to $115. Do these data suggest that occupancy would have been higher if Autumn Acres had raised its rates? What changes in nonprice demand factors might explain this change? (The supply, or the number of nursing home beds in the area, has not changed during this period.)
7.7 Your hospital is considering opening a satellite urgent care center about five miles from your main campus. You have been charged with gathering demographic information that might affect the demand for the center’s services. What data are likely to be relevant?
7.8 How would each of the following changes affect the demand curve for acupuncture? a. The price of an acupuncture session increases. b. A reduction in back problems occurs as a result of sessions about stretching on a popular television show. c. Medicare reduces the copayment for acupuncture from $20 to $10. d. The surgeon general issues a warning that back surgery is ineffective. e. Medicare stops covering back surgery
8.1 Why are elasticities useful for managers?
8.4 Why is the demand for an individual firm’s healthcare products usually elastic?
8.6 Average visits per week equal 640 when the copayment is $40 and 360 when the copayment rises to $60. Calculate the percentage change in visits, percentage change in price, and price elasticity of demand.