|
||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Demand For Goods
The demand for a good links the amount of a good that people would buy to the price of the good. There is an inverse relationship between the price and the quantity demanded of a product. In part one of this section we will try to understand what is behind the demand curve, and in part two we will address the concept of elasticity. Click on each of the following topics to read the notes In this section we will try to understand what is behind the demand curve —why people buy more of a good when its price declines and vice-versa. We will become familiar with some assumptions that conventional economists make about our behavior and our motivations. We will explore how consumers allocate their budget and how they determine the mix of goods and services that they wish to have and can afford. In the process we also will raise some questions about the validity of the conventional assumptions of the consumer behavior model. Consumer behavior http://www.usadata.com/ Consumer behavior http://sorrel.humboldt.edu/~campbell/p309.htm Elasticity measures how consumers change the quantities of different products that they purchase in response to changes in the price of different products, changes in the consumers' income, or changes in the price of other products. We will explain why when the price of gasoline increases, consumers barely cut their consumption of gasoline; and why an increase in international air fare may cause a more than proportionate decline in international tourism. Cigaretts is a product that is often used to illustrate how elasticity can be used to analyze consumers' behavior and also determine government policies. The addictive nature of smoking amounts to a relatively inelastic demand for cigaretts. In the United States a 10% increase in price of cigaretts lowers its consumption by only 3% (price elasticity of demand is 0.3). This means that a large tax increase on cigaretts would be required if government wants to curtail smoking. Imperical studies also suggest that smoking and drinking beer are complementary. A tax on beer that causes a 10% price increase would lower cigarette smoking by 2%, i.e., the cross elasticity of demand for cigaretts is about -0.2. Helpful Internet Sites: Data and information related to smoking http://www.globalink.org/ Measures to reduce demand for tobacco http://www.globalink.org/tobacco/wb/wb04.shtml Smoking related data for US http://www.globalink.org/tccp/USA.pdf Information and data on US tobacco http://tobaccofreekids.org Information and news about tobacco in Canada http://www.nsra-adnf.ca |
|---|
