Question

discuss price elasticity, income elasticity, and cross elasticity of demand in the tabacco industry and other sin industries

Answer 1

Ans. Price elasticity of demand for goods part of the sin industry is relatively inelastic as compared to other goods. This is because , these goods are addictive in nature and a change in process won't cause much change in the demand , unless the change is too big. Same is the case with income elasticity , these goods are relatively income inelastic because of the aforesaid reason. Cross price elasticity of these goods is also relatively low than the other goods because people are more addictive to the good which they consume , not to the related good.

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