01 review of externalities and elasticities

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Information about 01 review of externalities and elasticities

Published on September 30, 2015

Author: misterklein

Source: slideshare.net

1. Bellringer on slates • The city of Tucson is considering lowering the price of prescription drugs to help poor people. Correctly draw a graph showing this policy and its effects.

2. Assume that in the market for pharmaceutical drugs, the demand is relatively inelastic while the supply is relatively elastic. Congress is considering a per unit tax on every pill sold in the US. 1. Draw this market and explain who has a larger tax burden 2. If a firm raises its price in this market, explain what happens to revenue?

3. Tucson Toros

4. With your partner

5. Clips • Vikings commercial • John Oliver on HBO

6. Say the Tohono O'odham tribe wants to pay for and build a soccer stadium next to the casino on Los Reales. 1. List all negative and positive externalities that would be created. 2. Which set of externalities seem to be greater and why? 3. Why should the city of Tucson help finance the stadium? 4. Solve the problem of the negative externalities, how could the tribe still get the stadium while minimizing harm to neighbors and governments?

7. 8. If the tribe eventually builds the stadium and their research team notices that for every 10% decrease in tickets, they sell an addition 10% season tickets, what does this tell us about the elasticity of demand for tickets? 9. Sodas in the stadium however decrease in sales by 20% for every 5 % increase in price. What does that say about its elasticity? 10. Jersey sales increase by 5% for every 10% drop in price, what does that say about its elasticity? 11. What products would the team measure price changes using cross-price elasticity? 12. Which elasticity would you use if the unemployment rate became lower? 13. Is this a good idea? Explain using economic reasoning

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