Assignment:
2 to 3 Paragraphs
Watch the two videos below:
https://www.youtube.com/watch?v=BM7Nu1Qg5bM (Government Policies to Deal with Externalities)
https://www.youtube.com/watch?v=j_zTL3I7n9E (The Determinants of the Price Elasticity of Demand)
After watching the videos, respond to the questions below.
Gas prices fluctuate often and in both directions. In your initial post, respond to the following:
1. How responsive do you think consumers will be to the price change when these fluctuations occur due to changes in supply? Why? Use the various determinants of elasticity to explain your answer.
2. How does the price elasticity of demand for gasoline impact the effectiveness of taxes on gasoline aimed at correcting a negative externality?
Consider incorporating the supply-and-demand model to demonstrate the elasticity of demand for gas and to show the effects of tax on the market for gas.