lease review my response for accuracy. a. Describe and briefly explain the importance of the concept of elasticity: Answer: The concept of elasticity refers as a result of a change in price there are two forms of elastic namely elastic demand which means when there was a change in price There was a corresponding change in the demand of the good and in elasticity which means after a change in price there was no significant change in the demand of that this concept is crucial in helping policy and decision makers Understand the market trends and conditions and to respond effectively in order to maximize benefits for not only them but market participants as well b. Explain and demonstrate using examples how elasticity when it is zero is applied at the level of government with respect to the setting of prices for various types of goods and services Answer: When a good or service is considered to be inelastic this means the demand of such a good or service will remain unchanged regardless of the current price point an example of such a good would be the drug insulin used to treat diabetes. A diabetic will continuously therefore not buying is not an option. The impact of a tax imposed is determined By the demand in elasticity as when a government body imposes a tax on an inelastic good the supply curve will shift to the left and there will be increase in price, this tax impact on consumers leads to an increase in tax income or tax revenue. Take for instance the case of cigarettes an addictive substance regardless of the price There will be little to no change In demand and the tax burden falls on the consumer. Zero elasticity means when price I creases there is no change in the quantity demanded the good or service is perfectly inelastic and as a result the demand curve is a vertical straight line. Government utilizes zero elasticity of a good when setting prices for goods that are perfectly in elastic as when prices for such goods are se

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 4.9P: (Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of...

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Please review my response for accuracy. a. Describe and briefly explain the importance of the concept of elasticity: Answer: The concept of elasticity refers as a result of a change in price there are two forms of elastic namely elastic demand which means when there was a change in price There was a corresponding change in the demand of the good and in elasticity which means after a change in price there was no significant change in the demand of that this concept is crucial in helping policy and decision makers Understand the market trends and conditions and to respond effectively in order to maximize benefits for not only them but market participants as well b. Explain and demonstrate using examples how elasticity when it is zero is applied at the level of government with respect to the setting of prices for various types of goods and services Answer: When a good or service is considered to be inelastic this means the demand of such a good or service will remain unchanged regardless of the current price point an example of such a good would be the drug insulin used to treat diabetes. A diabetic will continuously therefore not buying is not an option. The impact of a tax imposed is determined By the demand in elasticity as when a government body imposes a tax on an inelastic good the supply curve will shift to the left and there will be increase in price, this tax impact on consumers leads to an increase in tax income or tax revenue. Take for instance the case of cigarettes an addictive substance regardless of the price There will be little to no change In demand and the tax burden falls on the consumer. Zero elasticity means when price I creases there is no change in the quantity demanded the good or service is perfectly inelastic and as a result the demand curve is a vertical straight line. Government utilizes zero elasticity of a good when setting prices for goods that are perfectly in elastic as when prices for such goods are set the governments total revenue will increase. The impact of tax is determined by the demand elasticity as changes in the price does not affect the demand. Examples of goods affected by the strategy are life-saving medication is gasoline and cigarettes.

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