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  3. 3. a small town has only one doctor. he charges a

3. A small town has only one doctor. He charges a rich person twice as much...

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Economics

3. A small town has only one doctor. He charges a rich persontwice as much as a poor person for a similar consultation.

a) How does this pricing policy relate to the price elasticityof demand? Are resources being used efficiently? Explain.

b) Suppose now that the doctor charges everyone the maximumprice they would be willing to pay. What happens to consumersurplus? Will resources the allocated efficiently in this case?Explain and illustrate your answer with a graph

Answer & Explanation Solved by verified expert
3.8 Ratings (413 Votes)
3 There is only one doctor so the market is a monopolyMonopolist charges a rich person twice as much as a poor person fora similar consultationa This pricing policy relate to the price elasticity of demandbecause rich are less    See Answer
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