Choose a product or a service that is elastic or inelastic and ask 10 students a
ID: 1107424 • Letter: C
Question
Choose a product or a service that is elastic or inelastic and ask 10 students about their consumption behavior if the price change. The following questions should be answered in your write up,
1. How much is their current consumption of the product or service at the current prices? (e.g. coffee, meals, chocolate, cigarettes, gasoline for their cars, chewing gum, bottled water, internet service on mobile phones, telco service provider, etc.
2. At what price would they change their consumption behavior? (i.e. double, triple).
3. If the prices reached that level where they will change their consumption behavior, how would they do it? (i.e. move to cheaper substitute)
4. How does their behavior change in the short run versus long run?
5. If the Value Added Tax proposed is implemented, how would they change their consumption given the current prices? (i.e. reduce, increase, remain the same, move to cheaper product)
Explanation / Answer
Price=$1 Elastic Inelastic 1 Coffee 5 10 2 Price P=$1.5 P=$3 3 move to chaeper substitute Will keep consuming. 4 In short run the behaviour is same as in long run In the short run the behaviour is stringent as comapared to that in the long run.