Question

1) Why is trade good?

2) Why does elasticity differ from on person to another and from one group to another?

3) How are cartels harmful?

Need help with these 3 homework questions.

Answer 1

1. Trade is good because it allows economies to specialize in the goods they have a competitive advantage in and allows them to increase their production as well as cut down on their costs because trade helps them import the goods they don't have a competitive advantage in and export the ones they have a competitive advantage in.

2. Elasticity differs from individual to individual and group to group based on the importance of the good for them. For example Elasticity of Apple iPhone User for today's generation will probably be lower than that for an Older generation or a group which doesn't really like Apple Products. As the choices differ, the elasticity also keeps changing. Who values which good how determines the elasticity for that good.

3, Cartels are harmful because forming a cartel gives higher market power to the firms which take customer's power away from them and firms then charge higher price compared to the scenario where cartels don't exist, And they succeed in charging higher price because cartels don't allow customers to take advantage of arbitrage as every producer is charging the same price. It leads to inefficiency of the market,