Question

4. Use the concept of common resources to explain why wild salmon faces extinction while goldfish face no such danger. Hint: nothing to do with the fact that we eat salmon and goldfish are mostly pets. 5. Use the concept of elasticity and total revenue to explain why the government is more likely to tax gasoline and not fast food.

Answer 1

4.
Wild salmon is a common resource , i.e. it is non-excludable(everybody has access) and rivalrous(catching a wild salmon,reduces the chances of someone else catching it) in nature. In easier terms, nobody owns wild salmons, while a goldfish is often owned by an individual privately, as a pet fish. Fishermen would therefore want to catch as many salmon as they want to maximize profits. Hence, the risk for them to be extinct

5.
The demand for gasoline is highly inelastic - this means that a change in price of gasoline does not result in a big change in quantity demanded. Hence, governments are likely to get more revenue even if the they increase taxes.
e.g. - If tax on gasoline increases by 20%, an office goer would still need it for his or her car to go to work.
On the other hand, the demand for fast food is elastic in nature - i.e. if prices increase, there would be a big change in quantity demanded. Thus, if fast food is taxed, it is more likely that people would reduce its consumption as there are many substitutes to fast food, like normal homemade food and stuff.