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The following graph charts the logarithm of U.S. per capita health care expenditures on the y-axis and the logarithm of U.S. per capita income on the x-axis. The relationship between the two series is well approximated by a line with slope of 1.4. This implies that in U.S. a 1% increase in income per capita is associated with approximately a 1.4% increase in per capita health care expenditure.
a) According to this graph, what is the elasticity of health expenditure per capita with respect to income per capita?
b) According to the terminology in the notes, what type of good does health care seem to be?
c) One of the goal of the recent health care reform in the United States is to slow down how much the country spends on health-care. According to this picture, if income per capita continues to grow, do you expect this to happen?
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