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Discussion 1.3 - talking here about supply elasticity not...

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1. Why is the concept of elasticity important? What does it tell economists? Elasticity is the ratio of change in one variable to the percent change in another variable. Its concept is very important because it “measures how much buyers and sellers respond to change in a market condition”. (Mankiw, 5 th Ed., pg 89). Elasticity shows economists the change in the production of products with different prices and different quantities sold at different units of sale. 2. Choose an industry with which you are familiar and tell whether you would classify it as either elastic or inelastic in the short run and long run. (Keep in mind that we are
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Unformatted text preview: talking here about supply elasticity, not demand elasticity.) Explain your answer using determinants of elasticity. The cigarette industry is comprised of wholesale markets that manufacture the product then sells them to retailers for a low price and the retailers turn around and sell them to consumers for five times as much. For those people who are addicated to smoking or those who just smoke after they eat or while drinking, will more than likely purchase the product no matter how much the price changes, the product is taxed by the government, or health professionals warnings of the dangers of smoking....
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