principles of microeconomics 6

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Guided Response: Respond substantively (a minimum of 100 words) to at least two of your classmates’ posts. What is similar or different between your post and theirs? What advice could you offer them? Substantive responses use theory, research, experience, or examples to support ideas and advance class knowledge on the discussion topic

Wk 2 Discussion 1

The Price Elasticity of Demand

Respond to #1

The factors that affect the price elasticity of demand are substitute goods, time, and income. For substitute goods, this affects the price elasticity because the more substitute for a good, the more elastic the demand is and conversely, the less substitute for a good, the less elastic the demand. As far as time, this affects the price elasticity of demand because if there is more time for a consumer to adjust the more elastic the demand becomes. This is because that time allows the consumer to seek alternatives options. Lastly, income affects the price of elasticity of demand based on the income of the consumer and changes in the income of the consumer.

I would consider bottled water and gourmet coffee to be elastic goods because of the number of substitutes that are available within the water and coffee industry. Therefore, if a price increases on one brand of bottled water, there are many other choices that a person can choose from. I would consider Apple devices to be inelastic because the demand for the devices will not change if the price increases. Consumers that want an iPhone generally will get an iPhone even though there are other platforms to choose from. I would consider gasoline to be inelastic because even with the change in price, it is still a necessity for consumers.

A necessity is something that a consumer needs to function. An example of this would be a medication that is prescribed based on health issues. A luxury is a good that is not something that a consumer needs but rather wants. An example of this would be a Corvette.

The price of elasticity of demand and total revenue are related in that together they determine either the setting of prices or the change. Total revenue is calculated by taking the number of items sold multiplied by the price of the items.

Amacher, R. and Pate, J. (2019). Principles of microeconomics (2nd ed.). Retrieved from

Respond to#2

“The price elasticity of demand is people’s responsiveness of quantity demanded (or consumption) when there is a change in price.” (Amacher & Pate, 2019)

Identify the determinants of the price elasticity of demand. Substitutability – the number of substitutes that are available. (Amacher & Pate, 2019) An example would be Soda – Clear/Color/Flavor. If customer wants a soda, there are numerous options. If the customer orders an Orange soda the substitutes are now limited but can still be substituted.

Time – The period of time a consumer has to adjust to demands. An example that comes to mind is End of Year Close-Out Sales. Companies are trying to unload supplies and want to drive an increase in demand by limiting the sale window. “Sale Ends Friday”.

Determine whether each of the following items is elastic or inelastic: In my opinion I would say bottled water is perfectly elastic because the demand will never go away, and the quantity demanded is infinite. Water is a function of life so like Air if I want to get to the next day I need.

Gourmet coffee, is elastic due to demand is price dependent. If Coffee is $1.00, I’ll buy it at Starbucks. If it is $5.85, I’ll make my own at home.

Gasoline is perfectly inelastic. There is no response in quantity demanded to change in price. If I need gas, I will have to pay what it says if I want to drive my vehicle.

Apple cell phones, I happen to keep buying Apple Cell Phones I wish they were not elastic but due to the high demand the price continues to go up and the supplied quantity also changes.

Distinguish between a necessity and a luxury. The difference between necessity and a luxury can turn gray really quick depending on your income level. My mom always told me to figure out if it is a Need or a Want. I need it like Air and Water or I want it like warm water and Ice in my drink. I feel as though as I get older, I need a hot shower, and Ice in my drink. But is it because it has become a need or a luxury, I have become accustomed to?


Amacher, R., & Pate, J. (2019). Pinciples of Microeconomics (2nd ed.). Retrieved from

Wk 2 Discussion 1


Respond to 1:

According to Amacher and Pate (2019), positive externalities are outcomes from a good or resource that are beneficial. An example of this is the outcome of education from a citizen. A citizen that is educated is more likely to have more to contribute to society and is less likely to require dependency from the government which would not cause an impact on the national debt. Negative externalities are outcomes from a good or resource that is not beneficial. An example of this would be trash from a household. After a citizen consumes a good and no longer needs it, it turns into trash. There then becomes a cost behind removing that trash as well as coming up with a solution to rid that trash.

To continue to drive education among citizens, there needs to be an option for a more affordable education. I know for myself, I attended a few years of college when I was out of college but was unable to finish due to the cost that I was occurring. The government making plans to make pursuing an education more affordable will ensure that more citizens have the ability to further their education. To help with the negative impact of household trash, offering recycling options for citizens and using those recyclables to create new goods. This also helps cut costs for organizations because they are not purchasing new goods all together but simply repurposing those existing recycled goods. Also, ensuring that the recycling option is affordable to citizens. I know in my hometown, we have to pay for our receptible as well as the cost for the city to pick up the recyclables. Some citizens could just opt to use the trash services because of the additional cost.

Amacher, R. and Pate, J. (2019). Principles of microeconomics (2nd ed.). Retrieved from

Wk 2 Discussion 2

  • Describe some differences between a positive externality and a negative externality. Positive externality is when positive occurs when the production of a good causes a benefit to the consumer. Education is a example of a positive externality because society benefits from the benefits of an individual’s independent studies. Negative externality is when the cost that is suffered by a consumer as a result of an economic transactions. An example is air pollution from machinery that is uses to help clean the road after a snow storm. The machinery helps society get back to the norm but it affect the ozone layers of the earth causing air pollution.
  • How could you solve your examples of externalities to attain market efficiency? Education externalities would be the cost of the individual has to pay back when they try to acquire an education to better their lives. And sometimes with work and life’s priorities step into play it makes it harder for that individual to give all into it like they want to.
  • Air pollution due to machinery clean up can be enforce government mandated low sulfur diesel fuel, and particle trapping filters and more efficient engines with fuel-injection software, recirculated exhaust systems or catalysts that prevent pollutants from forming. This will help eliminate nitrogen oxide and particulate matter from the diesel engines. (Links to an external site.)Links to an external site.

Does the government need to intervene with externalities to effect market efficiency? Government can play a role in reducing negative externalities by taxing goods when their production generates spill over cost. The goods will create effective increase in cost from the taxation the high cost will better reflect the absolute value of the production because the spill over will be included in the cost for the pollution that is cause from that business or individual.

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