Question
I need assistance in answering the below question. When prices or incomes change, consumers respond by changing their purchasing habits. Define the concepts of demand
I need assistance in answering the below question.
When prices or incomes change, consumers respond by changing their purchasing habits. Define the concepts of demand elasticity, income elasticity, and cross-price elasticity. Then, discuss a change in price that has occurred for a good or service that you consume. Consider how the change in price of that good or service changed your purchasing habits for that good or service, but also how it changed your purchasing habits for complementary or substitute goods or services. Explain which type of elasticity is involved in your specific example.
This is what I have come up with this far.
The change in the price of the commodity, change in income of consumer, and change in related commodity price affects the demand of the consumer. By comparing the percentage changes in price and quantity demanded of the commodity we can find the degree of responsiveness. There are three types of elasticity of demand: price elasticity of demand, income elasticity of demand, and cross-price elasticity of demand.
While demand for tobacco products is not as elastic as demand for many other consumer productsresearch has consistently demonstrated that increases in the price of tobacco products are followed by moderate falls in both the percentage of people smoking and the amount or number of tobacco products that remaining smokers consume.The percentage of people smoking declines because tax increases discourage non-users from starting, encourage current users to quit and, also very important, discourage former smokers from starting again.Because increases in tobacco taxes result in higher tobacco prices for everyone, the effect of even small resulting reductions in tobacco use can be very large across the whole population.
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