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Economics Assignment on Price Elasticity

   

Added on  2020-05-04

6 Pages988 Words170 Views
Running head: ECNOMICS ASSIGNMENTECNOMICS ASSIGNMENTName of Student:Name of University:Author Note:
Economics Assignment on Price Elasticity_1
1ECNOMICS ASSIGNMENTANSWER-1: Own price elasticity can be defined by, Ed = %change∈quantiydemanded%change∈priceWhich reflects the responsiveness of quantity demanded to change in its price and help sto detectwhich is elastic or inelastic demand? From the own price elasticity data of different foodcategory it can be seen that the low calorie segments of sweet and sugary snacks as well as dairyproduct have lower elasticity than the higher calorie one. For necessary goods like fruits andvegetables and grain, bread category higher calorific goods are more elastic. The lower ownprice elasticity refers to inelastic demand which clearly explains the inclination of people towardunhealthy food. Even though choices of goods are totally under the discretion of consumers, theincreased consumption of unhealthy foods calls for greater heart diseases, type 2 diabetes andeven cancer that increases more expenses in health care services made by government. Thisinduces government reduce the consumption of unhealthy food by discouraging them throughimposition of tax on them. Tax actually increases per unit price of the product and the burden oftax falls more on the consumers for inelastic demand. This would discourage purchase. On theother hand, subsidy in healthy food category like fruits, vegetables and grains can induceconsumers to make more consumption as they need to pay less per unit of purchase. Moreelasticity in this categories reflect that a subsidy can actually increase consumption as people aremore responsive to price.
Economics Assignment on Price Elasticity_2
2ECNOMICS ASSIGNMENTMore burden on consumersPrice received by producersSubsidy by Govt.PQQPE0E0SDDSImposition of SubsidyImposition of TaxLess burden on producersSource: (Author)ANSWER-2:a) The simple idea refers to the basic tenets of the Keynesian economics that focuses on demandside of the economy than the supply side of the classicalist views. The idea is to expand the shortrun demand in the face of depression through expansionary monetary and fiscal policies.Reduction in the rate of interest induces more money to be held in hand than invested or saved.This enhances the money supply in the economy, which further increases demand and moredemand paves way for more production. The increased government expenditure is one of the partof fiscal policy that can accelerate the economic activity of nation.
Economics Assignment on Price Elasticity_3

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