homework is due in 20 minutes

Situation A

Jenny, your niece, is a smart high-school student who wants to make smart choices for her future. Hearing of your course in Business Economics, she has emailed you asking for advice on whether to become a medical doctor and on the best location to practice it. She recognizes the high costs of tuition and the years of study involved in becoming a doctor. She wants to evaluate if that career choice is an optimum decision for her. So she has asked you for advice.

Having read the introduction to Chapter 1 on page 3 of the textbook, you recognize the significance of such a career decision for Jenny. You decide to examine the career choice in terms of the utility it provides to Jenny: return on investment as well as personal satisfaction of contributing to the well-being of others. But to evaluate the utility, you also need to identify and quantify the total opportunity costs of the decision. You decide to educate yourself about the market for physicians in terms of supply and demand, elasticity, costs of production, pricing, and normal profit. You want to provide Jenny with the most informed advice possible. 

B: Price Elasticity of Demand 

Discuss if demand is either price elastic or price inelastic. 

First, start by discussing the factors that determine the level of elasticity of a commodity such as:

-Availability of Close Substitutes 

-Passage of Time

-Whether Good is Luxury or Necessity

-Market Definition

-Consumer Budget Share

Second, calculate the Price Elasticity of Demand.  Then use this data to calculate elasticity of demand using the Midpoint Formula. Then interpret the result. If the result is less than 1, then demand is price inelastic, If the result is more than 1, price is elastic. Again discuss implications.