|
Microeconomics |
|
|
Microeconomics- McConnell Brue 16th Edition (Sixteenth Edition) Chapter 7 numbers 9, 11, 16 9. Elasticity demand would be important to me in determining the products on which taxes should be levied. I would need to know if the demand of the product would be elastic or would be inelastic. If the demand of a product is elastic, and I put a tax on it, then because the price increases from the tax (adding on taxes) the taxes then will decrease total revenues. The consumers are more sensitive to price changes on items that are a luxury. If the demand of the product is inelastic, that means that the consumers will not be very responsive to the price change because the item will be a necessity and consumers will pay the price for the product even if the price rises. Because of elastic demand, if I wanted to raise new revenues through excise taxes, I would be smart and tax inelastic products such as gasoline. Then I know that the total amount of goods bought will remain the same and I will still earn revenue off of it. 11. The decline in cigarette sales indicates that cigarette sales are an inelastic demand. Consumers have an inelastic demand to the price change in cigarettes because the percentage drop in sales was nothing drastic. All drugs are inelastic because producers know they can charge whatever price and consumers are addicted to them so they will still pay for them no matter the price. It is in a way like a necessity, not a luxury. 16.The purpose of charging different groups of customers different prices is because whoever is offering the product or service has to be sensitive to the fact that some customers have elastic demands and other customers have inelastic demands. Some customers could have an easy way for payment that applies to the income effect while others could have a hard time paying for products. For example, some airline travelers pay for the travel tickets out of their own pockets (who would be sensitive to price changes) while some travel customers don't (business traveling, who won't be sensitive to price changes). The travel lines have to try and prevent the business travelers form taking advantage and taking up all of the cheap airline tickets that are offered for the customers with elastic demand. They put limits on the stays like making the stay be over a Saturday night and that seems to filter out the inelastic demand travelers. Children also have elastic demands because of their low budgets. A child who goes to any kind of sporting event or entertainment event is often charged less. Even if a child gets a haircut, it takes as much time as an adult to cut, however, a child is charged less. Colleges tend to charge high-income customers (inelastic) full price for tuition while they offer low-income (elastic) customers lots of financial aid to diversify the students. Two more examples are how when Penn State has some entertainment activities and speakers; Penn State students have a huge discount for the events or don't have to pay at all while normal community customers have to pay or pay full price. The students don't have much spending cash but Penn State wants them to partake in such events because it will keep them out of trouble. So the students have elastic demand while the community customers have inelastic demand because they can afford to come to these things and because Penn State is not trying to keep the community out of trouble. The last example is how you can go to different restaurants and stores and see advertisements that senior citizens receive special discounts on special days. Senior citizens (elastic) don't work anymore and most of them don't have very good retirement, so they are offered special discounts for services in products, whereas normal people with jobs have inelastic demands and will continue to go out to eat and buy products.
© Copyright 2004 PurpleFrenzy.com. All rights reserved
|
|
|
Thank you for shopping here. Please bookmark this page. |
