question archive Suppose, in a given country, that the expected life span is 70 years
Suppose, in a given country, that the expected life span is 70 years
Subject:EconomicsPrice:2.88 Bought3
Suppose, in a given country, that the expected life span is 70 years. Health policy-makers increase health care spending by 10% and the life span rises to 71 years. The elasticity of life span with respect to health care spending is
A. 0.
B. +4/7
C. +1/7
D. +1
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- The correct option is C. +1/7.
Mathematically, the elasticity can be estimated as:
Elasticity = % Change in the quantity / % Change in the price
Here,
% Change in quantity = 71-70/70 = 1/70
% Change in price = 10% = 10/100
Now substitute the above values in the elasticity formula. That is
Elasticity = 1/70 * 100/10
Elasticity = 1/7
