Economic Concept of Elasticity Assignment
Added on 2021-04-21
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Running head: MICROECONOMICS ASSIGNMENT Microeconomics AssignmentName of the StudentName of the UniversityAuthor Note
MICROECONOMICS ASSIGNMENT 1Interview Summary The concerned assignment tries to explore and explain the economic concept ofelasticity of demand in the real economic scenarios, with the intension to observe the changeswhich occur in the consumption patterns and expenditure behaviours of individuals when heor she migrates from one country to another country, owing to the changes in price levels andavailabilities of goods and services (Cooper & John, 2013). The respondent selected, is an ELLearner named Justin Manta. Being French by birth Justin has shifted in France a couple ofyears ago. For the purpose of completion of the assignment, she was asked questions aboutthe differences which she observe in the price levels of different essential as well as luxurycommodities between her home country France and the country in which she has been livingin the recent times, France. To make the questions more targeted and comprehensive the researchers categorizedthe same in different sub-groups of commodities like food, clothing, transports, residence andoverall utility commodities, with the aim to study the differences in the prices of thesecommodities in these two countries and the resulting changes in the consumption patterns andexpenditure behaviours of the concerned individual (Gospodinov & Ng, 2013). As can be seen from the assertions of the concerned respondent, she perceives Canadato be cheaper than that of France, in terms of the overall cost of living, when measured interms of the exchange rate of the Canadian Dollars. She also asserts that the level of incomein Canada is in general higher to some extent than that of the same in France, therebyindicating towards the presence of a higher purchasing power in Canada, as compared toFrance (Burstein & Gopinath,2014). There apparently lies no differences in the transportcosts in both the countries as perceived by the respondent though she highlights the presenceof lower cab fares in Canada. On the other hand, according to her, the prices of daily
MICROECONOMICS ASSIGNMENT 2necessity foods like cereals and eggs are slightly high in Canada, which is not hurting giventhe higher income in the country. The prices of luxury meals are however far cheaper inCanada than that of France. The resident points towards an exception in this trend, in theresidential rents as the same is significantly higher in Canada than in France. When asked about the changes and adaptations in the consumption behaviour whichshe had to incorporate, she did not point out any such trends but highlighted that she hasincreased consumption luxury commodities in Canada than what she used to do in France. The following section of the essay, tries to analyse and interpret the responsesreceived taking into consideration the economic theoretical framework of price elasticitydemand. Price Elasticity of Demand The concept of price elasticity of demand, as found in the economics theories, refersto the percentage change in the demand for some commodity or service due to one percentagechange in the price of the same commodity or service (Baumol & Blinder, 2015). The priceelasticity of demand of goods and services can be of two types, which are as follows: Own Price Elasticity of Demand- This shows the degree of responsiveness of the demand of acommodity due to one-unit change in the price of the same commodity. Cross Price Elasticity of Demand- This term shows the degree of responsiveness of thedemand for a particular commodity or service due to one-unit change in the price of anyrelated commodity, which can be substitute or complement to the commodity in concern(Nicholson & Snyder, 2014). The magnitudes of elasticities of commodities vary depending upon their nature andmagnitude of demand as well as importance in the life of people. If with a change in price of
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