Elasticity of Demand in Economics

Running head: ECONOMICS
Economics
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Answer 1
The tobacco industry of Australia
Article: Price elasticity of demand for tobacco products - Tobacco In Australia. (2019).
The article states that the tobacco industry is an inelastic one. The elasticity of
tobacco is always less than one. The demand for tobacco is not much elastic in nature
compared to the other products. This states that an increase in the price of the tobacco
products will lead to a slight fall in the demand. Also, an introduction of tax will lead only a
slight change in the consumption of tobacco products. As, smoking is a hard habit to kick, the
demand for cigarettes will be highly inelastic in nature. It can be said that the tobacco product
are known to have price elastic less than one or it can be also said that the tobacco demand is
usually price inelastic in nature (Price elasticity of demand for tobacco products - Tobacco In
Australia., 2019). Therefore, the consumption of tobacco will be decreasing by a lesser
percentage compared to the increase in price. According to the research in US, Finnish and
Canada, it have been found out that a rise in the price in the manufactured cigarettes will lead
to an increase in the sales of the hand rolled cigarettes and the other tobacco products .
Figure1: Relatively inelastic demand of cigarettes

Article: What's the Price Elasticity of Demand for Gasoline?. (2019).
The elasticity of demand for gasoline is inelastic in nature since oil has very less
substitutes. Therefore it can be said that when the price of gasoline will rise, the demand for
gasoline will not change much. The article also states that in the long run, the price elasticity
of gasoline have been found to be -0.58 that also states when there will be a 10 percent
increase in the gasoline it will lead to only 5 percent decline in the gasoline (What's the Price
Elasticity of Demand for Gasoline?.,2019).The oil price is also known to be much volatile in
nature as the demand and supply of gasoline in known to be inelastic in nature. There will be
also limited oil supply that suggests that any disruption in the oil supply will shift the supply
curve to the left that will also lead to rise in price.
Figure 2: Inelastic demand of gasoline
Article: (Why Consumers Might Care About a Starbucks Price Hike, 2019).
The third article is about the elasticity of the Starbucks coffee. Starbucks is known to
have elastic demand as there is large amount of substitutes of coffee. Therefore, when there is
price swings in the market, it will have a huge impact on the buying and for this reason,