Evaluate the accuracy of the following statement: Since health ...

[jlmhmf]

Evaluate the accuracy of the following statement: Since health care is a necessity, the demand for health care will be perfectly inelastic.

Question 2

The value of a real option varies with all of the following, EXCEPT:
 a. the range of outcomes.
  b. the rate of interest.
  c. the rate of unemployment.
  d. the delay in resolving uncertainty.

[TDubDCFL]

Answer to Question 1

Health care is certainly a necessity in almost all cases. However, based on budget or income limitations, it may not be possible for some consumers to afford certain services at higher price levels. Thus demand for health care would be very inelastic - in the range of 0.2 - but not perfectly inelastic at 0.0.

Answer to Question 2

C