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In: Economics

Among the fun details in the article are the following estimates of price elasticity of demand:...

Among the fun details in the article are the following estimates of price elasticity of demand:

Cigarettes (US)

• −0.3 to −0.6 (General)

• −0.6 to −0.7 (Youth)

Rice

• −0.8 (Bangladesh)

• −0.8 (China)

• −0.25 (Japan)

Cannabis (US)

• −0.655

Soft drinks

• −0.8 to −1.0 (general)

• −3.8 (Coca-Cola)

• −4.4 (Mountain Dew)

A. Explain why the different estimates of price elasticity of demand for cigarettes regarding youth as opposed to all smokers in general either does or doesn’t seem to make sense.

B. Assuming that Japan is a wealthier country than either Bangladesh or China, why would demand for rice be less elastic in Japan than in either of the two other countries?

C. Why is demand for Coke and Mountain Dew more elastic than the demand for soft drinks in general?

D. If the price elasticity of supply for cannabis is 0.4, who would bear most of the burden of a cannabis tax, consumers or suppliers? Explain why.

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Expert Solution

Rahul Sunny answered 2 years ago
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