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ASSIGNMENT : In your response posts to peers, describe in detail how your own actions reflect the ideas shared in the discussion, and relate that to the concept of elasticity.
POST # 1
I feel that consumers will not be very responsive to the price change for gas when fluctuations occur due to changes in supply. Gas for most people in America is a necessity. It is utilized to get you to and from various locations, such as work, school, or the grocery store. The market for gasoline as a product is inelastic due to the fact that there are very few substitutes. There is no substitute for gasoline itself, there are other options such as electric and hybrid vehicles, but those options are fairly large purchases and will take time to acquire. Gasoline has a decent size place in a consumer’s budget; however with the other factors included it still remains inelastic. For the second part of this discussion, the price elasticity of demand for gasoline impacts the effectiveness of taxes aimed at correcting a negative externality immensely. The tax is used to create market equilibrium while at the same time correcting a negative externality. Since people have to continue buying gas the tax imposed by the government to fix issues regarding pollution and road repair, is equally shared by the consumer and the producer. This allows issues to be taken care of while simultaneously minimizing the burden put on the producer and consumer equally.
POST # 2
I do not feel that there will be a great response from consumers when a price change occurs in gas prices. We have all witnessed that supply and demands have a domino effect on the price of gasoline. During vacation and holidays, we see the increase in gas price rise due to the demand for the product. During other times when there is less traveling involved and the demand is not as evident, the gas prices decline. Unless you plan to go out and purchase an electric car, you will more than likely pay the current rate of gasoline regardless if the price has increased or decreased because there are no alternates to replace the need for gasoline. This would make gasoline a necessity and would be purchased regardless of the price and demand would be inelastic. Assuming the consumer has less than ten miles to drive to work daily, that would not impact the budget enough for the demand to be elastic. With long periods of increased prices customers may seek alternatives for transportation such as public transportation, riding bikes, or even consider relocating. With gasoline rates fluctuating and the demand and supply alternating, taxes will be impacted for instance if the supply is greater than the demand the buyer will absorb the higher tax. When the demand is more than the supply the producer will absorb the higher tax. The negative externality from the use of gasoline would be air pollution endured by those who do not purchase gasoline or own a car.
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