Part I
Question 1
Capitalizing on the basic knowledge, more people would opt to buy computers, six packs as well as new homes as their prices fall. This trend means the demand for these products is elastic.
Question 2
Based on this case, the two main substitutes of considerations comprise of the Colgate and the Close-Up toothpaste brands. Any of the two commodities can properly serve the roles of the other interchangeably well. The cross price elasticity between these two commodities is positive. This is as a result of demand rise in one commodity and a consequential fall in the demand of the other as a result of price changes. The elasticity of these two products is positive because they are very closer substitutes.
Price 30
Quantity
Price Elasticity Demand Curve for Colgate
Price 30
Increase in demand for one of the commodities would create a sense of competition thereby leading to a fall in price of the substitute. As a result, demand for the substitute commodity would equally rise.
Question 3
In order to increase revenues, the local government should tax commodities with inelastic demand. The demand for these commodities is hardly affected by their prices. In case the government wants to discourage purchase of an illegal commodity through high taxation, it will only succeed if the commodity has elastic demand trend.
Part II
Question 1
Partnerships have various advantages over cooperation organizations. The main advantage of partnerships is the ease of establishment. In addition, decision making in partnership organization is relatively easier than in corporations.
Question 2
Some examples of public goods include fresh air, clean water, roads and street lights. Even though all goods provided by the government fall under public goods, not all public goods are provided by the government.
Question 3
Examples of negative externalities include air pollution by industries and air pollution. These effects are caused by the industries through their wastes but are bone by the public population. Examples of positive externalities include increased education of individuals and bee keeping advent. In terms of education increment, the society gains a lot of benefit related to the developments. The second example of beekeeping helps the beekeeper with honey while at the same time help crop pollination process in farms.
Work Cited
Ferguson Charles E. Microeconomic Theory Homewood, Illinois: Richard D. Irwin Press (3rd edition.). 2007.
Frank Robert. Microeconomics and Behavior: McGraw-Hill Publishers (7th edition). 2009
Ray Powell. Public goods, externalities & Private goods: NY.AQA AS Economics. Philip Allan publishers, p. 352
