Answer each question and then reply to two classmates posts.
Think about your own experience as a consumer. Identify a product or service for which you personally realize a large amount of consumer surplus. Why is your surplus so large for this product or service?
Something that I was surprised to see not mentioned on here was textbooks for classes. Textbooks are very expensive these days so I tend to either use the rental option or buy a used copy rather than spend the extra money on a new book. Most books get used for one semester and then either go on the shelf or get sold online. I don’t see the need to shell out $100 for a new book when I can get it for half-price or less and it still have the same information.
Wrist wraps for protection or grip strength can vary in price but you can find really nice ones for around $15 to $20 dollars. This is relatively cheap compared to other personal gym equipment like belts or shoes that can cost over $100. Depending on the company and product material I would be willing to pay more than $20 for quality wrist wraps. Thankfully good wrist wraps can be found relatively inexpensive and last a long time.
Provide an example of a good that is either taxed or subsidized in such a way that attempts to account for the externality it creates. Describe the positive or negative externality associated with this good and the purpose of the tax or subsidy.
Cigarettes and other tobacco products have a tax on them to try and prevent people from doing it. With all the known health risks associated with smoking, people still continue to smoke on a regular basis. The amount of people who smoke has definitely gone down in the last 20 years, and I believe a good number of those people stopped just because it has become too expensive. I had someone tell me just the other day that a carton of cigarettes costs over $80. If a person smokes a pack a day, which is not uncommon for smokers, they would spend close to $3,000 a year on cigarettes alone. Eventually the price becomes too high and people force themselves to quit.
Almost all oil is shipped overseas to various countries in the process of buying and selling it. Sometimes during the shipping process oil can be spilled into the oceans. I don’t know if this counts exactly as an externality since it is not intentional but when the oil spills into the ocean it not only hurts aquatic/land life, but it hurts individuals and businesses that are related to the ocean. This can be fish catchers, deep-sea divers, or tourist attractions. These individuals and businesses have to pay the cost of an accident from the transaction of oil buying and selling. The oil pollution act was established by taxing oil to create a trust fund the EPA could use to help prevent or fix oil-based environmental disasters.
Provide an example of a product or service for which you have very elastic demand? Why is your demand for this product so elastic?
A product that has an elastic demand for me is cereal. The reason that I have an elastic demand is because I like to make my own breakfast and food, so I do not really use cereal. I mostly get cereal when I know I am going to be too busy to have time and prepare food. Furthermore, I do not really feel like I need it, so I do not like to spend too much on it. As such, when I buy cereal, it is usually because it is cheap, or I know that I am going to be too busy to make food.
A product that is very elastic are jeans. A person can find jeans anywhere from new to used jeans from places like Dillards, H&M, Macy’s, and many more places that you can find new jeans. There are also many places that you can sell used jeans like Plato’s closet, Goodwill, and other thrift stores. I don’t always buy jeans or even wear jeans on the daily because jeans can be very expensive, but I will buy a new pair like every 6 to 12 months depending on the jeans and my need for a new pair.