Chapter 6 Application - Elasticity

1. Explain why the government “likes sin taxes” (taxes on addictive substances such as
cigarettes and alcohol). Using the PDF,
http://www.taxadmin.org/assets/docs/Research/Rates/cigarette.pdf, find your home state,
and indicate the tax per pack. If you are not from the US, pick a state of your choice.
Find the state with the greatest and least amount of tax per pack.

- The government is interested in collecting taxes on this type of property since it is something
that is very popular with people and that does not provide a positive benefit to society, so the
payment of taxes is compensation for anticipated damage.

- Since I'm not from the USA The US chose the state of Utah, whose package tax is 170

- The state with the highest taxes is: Dist. Of Columbia (e) who has 450 tax

- The state with the lowest tax is: Missouri with 17

2. You have been hired as a consultant for the United Potato Growers. Your research
indicates that fresh potatoes have an own price elasticity of -.12 and potatoes in general
are -.29.
a. Would potato growers be better off increasing production or decreasing
production? Explain why.

Since the price elasticity of potatoes is inelastic, it is recommended that production decrease as
the lower the production, the higher the price and the income will also increase.

3. Think of a product or service you will provide in your profession.

The transport service of refrigerated cargo for food.

 a. Discuss the factors of elasticity and indicate if you think the item is elastic or
inelastic and why?

This is a service with high elasticity since it can generate large income since the demand for this
product by food warehouses is high, therefore, this service is essential to supply the
warehouses, which allows expanding the investment of cars and increasing its service capacity
to other warehouses quickly, in addition to that as the consumer's sales capacity increases, its
income increases and it demands more refrigerated cargo transportation service.

b. Discuss significant items that would be considered substitutes or complements

for the item.

The complementary ones would be to be able to buy cars with a greater load capacity that
allows increasing the load service capacity.

And substitutes rent refrigerated cargo cars instead of buying refrigerated cargo cars.

c. Discuss if the item is a normal or inferior good and explain why.

This is a normal article since a higher level of competitiveness and income requires more.

4. In your Week 3 Chapter Application exercise, you were asked to select a publicly traded
company that you would consider investing in. You were asked the current the symbol
of the company, its stock price at that time, and to explain why you chose to invest in
that company.
What is the current price of that stock? Has the price increased or decreased since Week
3? Discuss what factors have caused the price of your stock to change.

In week 3 I chose the shares of: S&P 500 (Standard & Poor´s 500) which had a value of
$ 2,868.44 for May 26 the price is: 2,991.77 which indicates that it has increased $
123.44.
The factors that have caused the price to increase is the gradual reactivation that the
economy has had due to the covid 19, since the possibility of buying due to the increase
in income has gradually increased.