Question

5 5 Elasticity Discussion Please choose one of the estimated elasticities listed below (and in the presentation) and explain WHY you think demand for that good or service is elastic or inelastic. Remember: if the estimated elasticity is greater than one in absolute value, demand is elastic. If the estimated elasticity is less than one (a fraction) in absolute value, demand is inelastic. Please don't forget to evaluate or add to one of your classmate's posts. Cinema visits (US) Cigarettes (US) o-0.87 (General) o-0.3 to-0.6 (General) Live Performing Art o-0.6 to-0.7 (Youth) o-0.4 to -0.9 Alcoholic beverages (US) Transport o-0.3 or -0.7 to-0.9 as of 1972 (Beer) o-0.20 (Bus travel US o-1.0 (Wine) o-2.80 (Ford compac o-1.5 (Spirits) .Soft drinks Airline travel (US) o-0.8 to-1.0 (general o-0.3 (First Class) o-3.8 (Coca-Cola e) o-0.9 (Discount) o-4,4 (Mountain Dew o-1.5 (for Pleasure Travelers) Steel Car fuel o-0.2 to-0.3 o-0.25 (Short run) Marijuana o-0.64 (Long run) .-1.0 Medicine (US) Oil (World) o-0.31 (Medical insurance) o-0,4 o-03 to -06 (Pediatric Visits) O

Answer 1

The following is the one of the estimated elasticity:

• Car Fuel

Elasticity = 0.25 (Short run)

Elasticity = 0.64 (Long run)

The demand for Car fuel elasticity is inelastic in the short run i.e ( Elasticity = 0.25 (Short run) less than 1.

Explanation

In the Short run, when price of Car fuel increase, the demand for fuel is less responsive to increase in price of Car fuel. During the shorter period of time, consumer is not able to find substitute for increased prices of Car Fuel. So, there is little change in the demand for Car Fuel, when price changes in the Short run. Therefore, the demand for Car fuel elasticity is inelastic in the short run i.e ( Elasticity = 0.25 (Short run) less than 1.

The demand for Car fuel elasticity is elastic in the long run i.e ( Elasticity = 0.64 (long run) greater than 1.

Explanation

In the long run, when price of Car fuel increase, the demand for fuel is become more responsive to increase in price of Car fuel. During the longer period of time, consumer is now able to find substitute for increased prices of Car Fuel. It can switch to car which is more fuel economical and electric car. Due availability of more substitute, there is greater change in the demand for Car Fuel, when price changes in the long run. Therefore, the demand for Car fuel elasticity is elastic in the long run i.e ( Elasticity = 0.64 (long run) greater than 1.