1. Please explain inelasticity and elasticity of demand. What happens when there is a tax on luxury items?
In economics, elasticity is the measure of responsiveness towards the demand for a product when its price is changed. The basic formula for calculating the elasticity of a product is to divide the percentage change in quantity demanded by the percentage change in price. When the value of elasticity is greater than one percent, it indicates that the demand for the good is sensitive to price changes. Economists see these types of products as more elastic due to their highly responsive nature. If the value of elasticity is less than one percent, however, it indicates that the demand for the good is not as sensitive to its price. Economists …show more content…
Most externalities have negative impacts on individuals or society as a whole. Usually this happens because the action taken by the company results in a private gain that causes them to overlook the harmful side-effects that it may have. One well known example of a negative externality is when a factory gives off smoke. While this is not commonly seen in the United States anymore due to the creation of the Air Pollution Control Act and the Environmental Protection Agency, other countries like China do not regulate their factories’ gas emissions. This enables those companies to release harmful particles and gases into the air without any concern for the amount of pollution they produce, thus harming the environment and millions of people who may not even conduct business with the company. Another example of a negative externality would be if a company set up their business near the residence of an individual who does not frequent the establishment. This scenario may create a large amount of traffic on the individual's road and could cause customers to park right in front of the house which would infringe on the peace within the community. A third example of a negative externality would be if an individual ran a small business, like a diner, that was frequented by workers of a factory that then …show more content…
How does perfect competition explain a fair and efficient allocation of resources and products? Perfect competition is a type of theoretical market structure that focuses on the relationship between the producer and the consumer. In this model, it is assumed that the goods offered for sale are all equal in quality and that the market itself sets the price. Since there is a large number of buyers and sellers, neither party has total influence or control over the market price.
Welfare economics is the specific study of how the allocation of resources and goods affects the economic well-being. This branch of study focuses on the benefits that buyers and sellers receive when they engage in market transactions and how society can make these benefits as large as possible. One important fact that this study has revealed is that in any market structure, the equilibrium forces of supply and demand can maximize the total amount of benefits received by all buyers and sellers
In economics, elasticity is the measure of responsiveness towards the demand for a product when its price is changed. The basic formula for calculating the elasticity of a product is to divide the percentage change in quantity demanded by the percentage change in price. When the value of elasticity is greater than one percent, it indicates that the demand for the good is sensitive to price changes. Economists see these types of products as more elastic due to their highly responsive nature. If the value of elasticity is less than one percent, however, it indicates that the demand for the good is not as sensitive to its price. Economists …show more content…
Most externalities have negative impacts on individuals or society as a whole. Usually this happens because the action taken by the company results in a private gain that causes them to overlook the harmful side-effects that it may have. One well known example of a negative externality is when a factory gives off smoke. While this is not commonly seen in the United States anymore due to the creation of the Air Pollution Control Act and the Environmental Protection Agency, other countries like China do not regulate their factories’ gas emissions. This enables those companies to release harmful particles and gases into the air without any concern for the amount of pollution they produce, thus harming the environment and millions of people who may not even conduct business with the company. Another example of a negative externality would be if a company set up their business near the residence of an individual who does not frequent the establishment. This scenario may create a large amount of traffic on the individual's road and could cause customers to park right in front of the house which would infringe on the peace within the community. A third example of a negative externality would be if an individual ran a small business, like a diner, that was frequented by workers of a factory that then …show more content…
How does perfect competition explain a fair and efficient allocation of resources and products? Perfect competition is a type of theoretical market structure that focuses on the relationship between the producer and the consumer. In this model, it is assumed that the goods offered for sale are all equal in quality and that the market itself sets the price. Since there is a large number of buyers and sellers, neither party has total influence or control over the market price.
Welfare economics is the specific study of how the allocation of resources and goods affects the economic well-being. This branch of study focuses on the benefits that buyers and sellers receive when they engage in market transactions and how society can make these benefits as large as possible. One important fact that this study has revealed is that in any market structure, the equilibrium forces of supply and demand can maximize the total amount of benefits received by all buyers and sellers