- Suppose a stamp dealer buys the only two existing copies of a
stamp at an auction. After the purchase, the dealer goes to the
front of the room and burns one of the stamps in front of the
shocked audience. What must the dealer believe in order for this
to be a wealth-maximizing action? Explain with a demand-and--
supply diagram. - Consider the following products:
kitchen blenders
fibre optic cable
neurosurgery
oil tankers
sour cream doughnuts
rental apartments
a. Which of these would have the greatest supply elasticity
in the short run? Why?
b. Which would have the least supply elasticity in the short
run? Why? - Excise taxes are sometimes referred to as “sin taxes” when applied
to products such as alcohol and cigarettes. Using the concepts of
elasticity of demand and supply, explain how we could determine
whether it is the consumer or the producer that is bearing the
burden of such a tax.
sean pound
(Sean Pound)
#1