Question

Answer 2 of the following questions and relate your answer with other students’ answers: 1. If your incomes increases by 20 percent, how much would your quantity demanded change per month on average? Estimate your income elasticity and explain your answer. 2. What is the cross-elasticity of supply of one of the goods or services that your company provides? Why? How does your answer relate with another student answer? 3. Gridlock in Toronto already costs the region $6 billion a year, with average commute times of 80 minutes, among the highest in North America. By 2031, commute times will increase by 27 minutes. Civic leaders are looking at the options: road tolls, a regional gas tax, and parking levies. Source: Toronto Star, June 24, 2011 With road tolls, a regional gas tax, and parking levies would Toronto roads become less congested? If the new charges cut commute times, would the Toronto road system be more efficient? Explain your answers. 4. Explain a negative externality that you have experienced or that your town/region has experienced. How did you address it? What was the role of the government in it? And the role of private organizations?

Answer 1

ANSWER:

(1)

(2)

Let's take the example of a car manufacturing company.

Now, if the price of steel increases, this means that the cost of production of cars will increase. This would affect the supply of cars. This is an example of cross-price elasticity wherein the changes in the supply of cars gets affected by the changes in the price of steel. Cars can have relatively high elasticity or low elasticity towards changes in price levels of steel.

It completely depends on how much steel is used in manufacturing that particular car. If a lot of steel is used in the manufacturing of car, then the cross-price elasticity will be relatively higher as against when a little amount of steel is used in its manufacturing.