In anticipation of the upcoming quarterly disclosure of profits, you help board of directors for the challenge that U.S. tariffs on Chinese imports are having on profits.

Conceptually, you will be asked to address elasticity as a measurement of the magnitude of a change. Additionally, you will be asked to examine how price elasticity of demand plays a role in consumer demand and how profits are affected by a tariff.

Very Big US AutoVery Big US Auto is one of the oldest and largest auto manufacturers in the U.S. Very Big US Auto's supply chain is highly dependent on components manufactured in China and assembled in the U.S. Very Big US Auto knows that the price elasticity of supply is relatively inelastic and that demand is relatively elastic, with a price elasticity of demand of 1.2.

In your discussion post, address the following prompts within the context of your chosen hypothetical company of which you are the CEO:

• Is the demand curve for your product relatively elastic, inelastic, or unitary elastic? Demonstrate this for your company's product by how much the quantity demanded will change if you pass on the 25% increase in cost from the tariff as a price increase for your product. In other words, show your calculation of the percentage change in the quantity demanded given a 25% change in the price.
• Given your company's price elasticity of supply and price elasticity of demand, create a statement for your board of directors as to the potential impact of profits. Who will pay the larger share of the tariff: your firm or your customers?