• Read the following statement and discuss if you agree or disagree, and your rationale: If the demand of illegal drugs is inelastic, increased arrests of illegal-drug sellers will increase total expenditures on illegal drugs.
• Discuss at least 2 reasons for the change in this scenario: Early suppliers of more fuel-efficient cars were able to charge premium prices for them, but that ability faded as other suppliers adopted similar technologies.

Something to consider is the significance of gasoline prices to the type of car that is demanded. When fuel prices are high consumers do not appear to be concerned about the type of car they purchase. They will often be going for the truck type vehicles (SUVs) that consume more gasoline. However, when fuel prices climb those gas guzzlers get turned in and sold and there is a migration to the fuel-efficient cars, especially among those who do a. lot of miles. We have seen this happen many times since the mid-70s. The fuel-efficient car is popular, gas prices drop, stylish cars become popular, prices for gas climb, there is a migration back to fuel efficiency, and the cycle repeats and repeats. We do not appear to learn from history. Of course, the good part is that today many more luxury cars are fuel efficient. The thing is though that as long as consumers continue to purchase less fuel-efficient cars and those cars are profitable to the car manufacturer, then their production will continue.

Tesla, is still in my opinion, a luxury car. The $35,000 price tag was meant to appeal to younger buyers. Statistically speaking if a consumer commits to a specific brand car at an early age, they will continue to purchase that brand as their income increases and they become the purchasers of the higher priced car. BMW and Mercedes Benz employed this psychology of buying many years ago when they introduced lower priced models to appeal to this group of working young adults. As the price of the BMW continued to grow, they again introduced the lower priced 1 series to keep a presence in the market of the young adult purchaser. Most car manufacturers have a series of brand that are priced according to the income cycle they are meant to appeal to.

The green revolution was popular several years ago, but following the Recession of 2008 began to fade a bit as consumers developed a greater price awareness and going green, no matter what the product, has a higher cost. In the car market, as I mentioned in another response yesterday, there also developed an awareness of the lack of green disposability of the batteries that run these cars. Those I know that own Tesla's own them not so much as a green car, but because of the novelty associated with owning one.