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Elasticity

Elasticity. of. Demand. I want to talk about two products for the next ten minutes. Insulin and. Bicycles. Diabetes. molecules. Every morning, millions of diabetics give themselves a shot of insulin just to stay alive. In the U.S., there are over 10 million diabetics,

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Elasticity

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  1. Elasticity of Demand

  2. I want to talk about two products for the next ten minutes. Insulin and Bicycles

  3. Diabetes molecules

  4. Every morning, millions of diabetics give themselves a shot of insulin just to stay alive.

  5. In the U.S., there are over 10 million diabetics, 110 million worldwide. (2001)

  6. Now you say to yourself again, so what do insulin and bicycles have in common? Diabetics ride bicycles.

  7. P P $300 $3 $200 $2 $100 $1 D D 10 m 100 200 500 Q Q Bicycles Insulin

  8. P INELASTIC P ELASTIC $300 $3 $200 $2 $100 $1 D D 10 m 100 200 500 Q Q Insulin Bicycles Five tests for figuring elasticity of demand: Few substitutes Many substitutes One has few substitutes and one has many? Necessity Luxury One is a necessity and the other is a luxury? Inexpensive Expensive One is expensive and the other is inexpensive

  9. P P $300 $3 $200 $2 $100 $1 D D 10 m 100 200 500 Q Q Bicycles Insulin P x Q = TR TR P x Q = x $30,000 $3 10m $30m x 100 $300 $2 x 10m $40,000 $20m x 200 $200 $1 x 10m x 500 $50,000 $10m $100

  10. Royal Order of TANSTAA"F"L

  11. Stand up, raise your right hand and repeat after me: I, state your name, do solemnly swear, to uphold the laws of supply and demand for the rest of my life or for as long as I live. And I promise to memorize the determinants of demand and the determinants of supply.

  12. And I promise to greet my teacher, who is considered to be the Grand Puba of The Royal Order of TANSTAA”F”L, with the greeting that ALL members of The Royal Order of TANSTAA”F”L greet their Grand Puba with. Congratulations! You are all now official members or The Royal Order of TANSTAA”F”L.

  13. Royal Order of TANSTAA"F"L

  14. Royal Order of TANSTAA"F"L

  15. 1st class to be initiated into the Royal Order of TANSTAA”F”L AP Econ – 1A

  16. Royal Order of TANSTAA"F"L Theme Song

  17. There ain’t no free lunch, no free lunch today. I’ll buy you a steak, but I’ll take it out your pay. La. La. La. La. La. La. La. There ain’t no free lunch, no free lunch today.

  18. There ain’t no free lunch, no free lunch today. I’ll buy you a steak, but I’ll take it out your pay. La. La. La. La. La. La. La. There ain’t no free lunch, no free lunch today.

  19. There ain’t no free lunch, no free lunch today. I’ll buy you a steak, but I’ll take it out your pay. La. La. La. La. La. La. La. There ain’t no free lunch, no free lunch today.

  20. Finding products with Inelastic Demand and Taxing them.

  21. I am going to name a product and you let me know if the demand for the product is elastic or inelastic: Pizza Hamburger Gasoline

  22. *The Federal Tax of 18.4 cents per gallon is collected in all states in addition to any state or local taxes on gasoline sales.

  23. State Tax/Cents per gallon* State Tax/Cents per Gallon* Alabama 18 Montana 27.75 Alaska 8 Nebraska 24.6 Arizona 18 Nevada 23 Arkansas 21.5 New Hampshire 18 California 18 New Jersey 14.5 Colorado 22 New Mexico 17 Connecticut 25 New York 29.65 Delaware 23 North Carolina 23.4 Dist. of Columbia 20 North Dakota 21 Florida 14.1 Ohio 22 Georgia 7.5 Oklahoma 17 Hawaii 16 Oregon 24 Idaho 25 Pennsylvania 25.9 Illinois 19 Rhode Island 30 Indiana 18 South Carolina 16 Iowa 20.1 South Dakota 22 Kansas 23 Tennessee 20 Kentucky 15 Texas 20 Louisiana 20 Utah 24.5 Maine 22 Vermont 20 Maryland 23.5 Virginia 17.5 Massachusetts 21.5 Washington 23 Michigan 19 West Virginia 20.5 Minnesota 20 Wisconsin 31.1 Mississippi 18 Wyoming 14 Missouri 17 Federal Tax Rate 18.4

  24. State Tax/Cents per gallon* State Tax/Cents per Gallon* Alabama 18 Montana 27.75 Alaska 8 Nebraska 24.6 Arizona 18 Nevada 23 Arkansas 21.5 New Hampshire 18 California 18 New Jersey 14.5 Colorado 22 New Mexico 17 Connecticut 25 New York 29.65 Delaware 23 North Carolina 23.4 Dist. of Columbia 20 North Dakota 21 Florida 14.1 Ohio 22 Georgia 7.5 Oklahoma 17 Hawaii 16 Oregon 24 Idaho 25 Pennsylvania 25.9 Illinois 19 Rhode Island 30 Indiana 18 South Carolina 16 Iowa 20.1 South Dakota 22 Kansas 23 Tennessee 20 Kentucky 15 Texas 20 Louisiana 20 Utah 24.5 Maine 22 Vermont 20 Maryland 23.5 Virginia 17.5 Massachusetts 21.5 Washington 23 Michigan 19 West Virginia 20.5 Minnesota 20 Wisconsin 31.1 Mississippi 18 Wyoming 14 Missouri 17 Federal Tax Rate 18.4

  25. Telephone?

  26. This tax adds three percent to the cost of the telephone bill of consumers. If a consumer has a monthly bill for local and long-distance service totaling $100, an additional $3 is applied to the bill with the result that the consumer must pay $103, although the actual charge for service amounted to $100.In fiscal year 1999, the telephone excise tax provided $5.2 billion to the Federal Treasury.

  27. Cigarettes?

  28. http://www.cppa.utah.edu/westernstatesbudgets/WPSA99/09map.gifhttp://www.cppa.utah.edu/westernstatesbudgets/WPSA99/09map.gif

  29. A P P E N D I X Sorted by Tax Rate Sorted Alphabetically by State Name Tax Rate Tax Rate State (per pack of 20) State (per pack of 20) Alabama . . . . . . . . . . . . . . . . . . . . . $0.165 Alaska. . . . . . . . . . . . . . . . . . . . . . . $1.000 Arizona . . . . . . . . . . . . . . . . . . . . . . $0.580 Arkansas . . . . . . . . . . . . . . . . . . . . . $0.315 California . . . . . . . . . . . . . . . . . . . . . $0.870 Colorado . . . . . . . . . . . . . . . . . . . . . $0.200 Connecticut. . . . . . . . . . . . . . . . . . . $0.500 Delaware. . . . . . . . . . . . . . . . . . . . . $0.240 District of Columbia . . . . . . . . . . . . . $0.650 Florida. . . . . . . . . . . . . . . . . . . . . . . $0.339 Georgia . . . . . . . . . . . . . . . . . . . . . . $0.120 Hawaii. . . . . . . . . . . . . . . . . . . . . . . $1.000 Idaho . . . . . . . . . . . . . . . . . . . . . . . $0.280 Illinois . . . . . . . . . . . . . . . . . . . . . . . $0.580 Indiana . . . . . . . . . . . . . . . . . . . . . . $0.155 Iowa . . . . . . . . . . . . . . . . . . . . . . . . $0.360 Kansas . . . . . . . . . . . . . . . . . . . . . . $0.240 Kentucky. . . . . . . . . . . . . . . . . . . . . $0.030 Louisiana. . . . . . . . . . . . . . . . . . . . . $0.240 Maine . . . . . . . . . . . . . . . . . . . . . . . $1.000 Maryland . . . . . . . . . . . . . . . . . . . . . $0.660 Massachusetts . . . . . . . . . . . . . . . . $0.760 Michigan . . . . . . . . . . . . . . . . . . . . . $0.750 Minnesota . . . . . . . . . . . . . . . . . . . . $0.480 Mississippi. . . . . . . . . . . . . . . . . . . . $0.180 Missouri . . . . . . . . . . . . . . . . . . . . . $0.170 Montana . . . . . . . . . . . . . . . . . . . . . $0.180 Nebraska . . . . . . . . . . . . . . . . . . . . $0.340 Nevada . . . . . . . . . . . . . . . . . . . . . . $0.350 New Hampshire. . . . . . . . . . . . . . . . $0.520 New Jersey . . . . . . . . . . . . . . . . . . . $0.800 New Mexico . . . . . . . . . . . . . . . . . . $0.210 New York . . . . . . . . . . . . . . . . . . . . $1.110 North Carolina . . . . . . . . . . . . . . . . . $0.050 North Dakota. . . . . . . . . . . . . . . . . . $0.440 Ohio . . . . . . . . . . . . . . . . . . . . . . . . $0.240 Oklahoma . . . . . . . . . . . . . . . . . . . . $0.230 Oregon . . . . . . . . . . . . . . . . . . . . . . $0.680 Pennsylvania . . . . . . . . . . . . . . . . . . $0.310 Rhode Island . . . . . . . . . . . . . . . . . . $1.000 South Carolina. . . . . . . . . . . . . . . . . $0.070 South Dakota . . . . . . . . . . . . . . . . . $0.330 Tennessee . . . . . . . . . . . . . . . . . . . . $0.130 Texas . . . . . . . . . . . . . . . . . . . . . . . $0.410 Utah . . . . . . . . . . . . . . . . . . . . . . . . $0.515 Vermont . . . . . . . . . . . . . . . . . . . . . $0.440 Virginia . . . . . . . . . . . . . . . . . . . . . . $0.025 Washington . . . . . . . . . . . . . . . . . . . $1.425 West Virginia . . . . . . . . . . . . . . . . . . $0.170 Wisconsin . . . . . . . . . . . . . . . . . . . . $0.770 Wyoming. . . . . . . . . . . . . . . . . . . . . $0.120

  30. A P P E N D I X Sorted by Tax Rate Sorted Alphabetically by State Name Tax Rate Tax Rate State (per pack of 20) State (per pack of 20) Alabama . . . . . . . . . . . . . . . . . . . . . $0.165 Alaska. . . . . . . . . . . . . . . . . . . . . . . $1.000 Arizona . . . . . . . . . . . . . . . . . . . . . . $0.580 Arkansas . . . . . . . . . . . . . . . . . . . . . $0.315 California . . . . . . . . . . . . . . . . . . . . . $0.870 Colorado . . . . . . . . . . . . . . . . . . . . . $0.200 Connecticut. . . . . . . . . . . . . . . . . . . $0.500 Delaware. . . . . . . . . . . . . . . . . . . . . $0.240 District of Columbia . . . . . . . . . . . . . $0.650 Florida. . . . . . . . . . . . . . . . . . . . . . . $0.339 Georgia . . . . . . . . . . . . . . . . . . . . . . $0.120 Hawaii. . . . . . . . . . . . . . . . . . . . . . . $1.000 Idaho . . . . . . . . . . . . . . . . . . . . . . . $0.280 Illinois . . . . . . . . . . . . . . . . . . . . . . . $0.580 Indiana . . . . . . . . . . . . . . . . . . . . . . $0.155 Iowa . . . . . . . . . . . . . . . . . . . . . . . . $0.360 Kansas . . . . . . . . . . . . . . . . . . . . . . $0.240 Kentucky. . . . . . . . . . . . . . . . . . . . . $0.030 Louisiana. . . . . . . . . . . . . . . . . . . . . $0.240 Maine . . . . . . . . . . . . . . . . . . . . . . . $1.000 Maryland . . . . . . . . . . . . . . . . . . . . . $0.660 Massachusetts . . . . . . . . . . . . . . . . $0.760 Michigan . . . . . . . . . . . . . . . . . . . . . $0.750 Minnesota . . . . . . . . . . . . . . . . . . . . $0.480 Mississippi. . . . . . . . . . . . . . . . . . . . $0.180 Missouri . . . . . . . . . . . . . . . . . . . . . $0.170 Montana . . . . . . . . . . . . . . . . . . . . . $0.180 Nebraska . . . . . . . . . . . . . . . . . . . . $0.340 Nevada . . . . . . . . . . . . . . . . . . . . . . $0.350 New Hampshire. . . . . . . . . . . . . . . . $0.520 New Jersey . . . . . . . . . . . . . . . . . . . $0.800 New Mexico . . . . . . . . . . . . . . . . . . $0.210 New York . . . . . . . . . . . . . . . . . . . . $1.110 North Carolina . . . . . . . . . . . . . . . . . $0.050 North Dakota. . . . . . . . . . . . . . . . . . $0.440 Ohio . . . . . . . . . . . . . . . . . . . . . . . . $0.240 Oklahoma . . . . . . . . . . . . . . . . . . . . $0.230 Oregon . . . . . . . . . . . . . . . . . . . . . . $0.680 Pennsylvania . . . . . . . . . . . . . . . . . . $0.310 Rhode Island . . . . . . . . . . . . . . . . . . $1.000 South Carolina. . . . . . . . . . . . . . . . . $0.070 South Dakota . . . . . . . . . . . . . . . . . $0.330 Tennessee . . . . . . . . . . . . . . . . . . . . $0.130 Texas . . . . . . . . . . . . . . . . . . . . . . . $0.410 Utah . . . . . . . . . . . . . . . . . . . . . . . . $0.515 Vermont . . . . . . . . . . . . . . . . . . . . . $0.440 Virginia . . . . . . . . . . . . . . . . . . . . . . $0.025 Washington . . . . . . . . . . . . . . . . . . . $1.425 West Virginia . . . . . . . . . . . . . . . . . . $0.170 Wisconsin . . . . . . . . . . . . . . . . . . . . $0.770 Wyoming. . . . . . . . . . . . . . . . . . . . . $0.120

  31. A P P E N D I X Sorted by Tax Rate Sorted Alphabetically by State Name Tax Rate Tax Rate State (per pack of 20) State (per pack of 20) Alabama . . . . . . . . . . . . . . . . . . . . . $0.165 Alaska. . . . . . . . . . . . . . . . . . . . . . . $1.000 Arizona . . . . . . . . . . . . . . . . . . . . . . $0.580 Arkansas . . . . . . . . . . . . . . . . . . . . . $0.315 California . . . . . . . . . . . . . . . . . . . . . $0.870 Colorado . . . . . . . . . . . . . . . . . . . . . $0.200 Connecticut. . . . . . . . . . . . . . . . . . . $0.500 Delaware. . . . . . . . . . . . . . . . . . . . . $0.240 District of Columbia . . . . . . . . . . . . . $0.650 Florida. . . . . . . . . . . . . . . . . . . . . . . $0.339 Georgia . . . . . . . . . . . . . . . . . . . . . . $0.120 Hawaii. . . . . . . . . . . . . . . . . . . . . . . $1.000 Idaho . . . . . . . . . . . . . . . . . . . . . . . $0.280 Illinois . . . . . . . . . . . . . . . . . . . . . . . $0.580 Indiana . . . . . . . . . . . . . . . . . . . . . . $0.155 Iowa . . . . . . . . . . . . . . . . . . . . . . . . $0.360 Kansas . . . . . . . . . . . . . . . . . . . . . . $0.240 Kentucky. . . . . . . . . . . . . . . . . . . . . $0.030 Louisiana. . . . . . . . . . . . . . . . . . . . . $0.240 Maine . . . . . . . . . . . . . . . . . . . . . . . $1.000 Maryland . . . . . . . . . . . . . . . . . . . . . $0.660 Massachusetts . . . . . . . . . . . . . . . . $0.760 Michigan . . . . . . . . . . . . . . . . . . . . . $0.750 Minnesota . . . . . . . . . . . . . . . . . . . . $0.480 Mississippi. . . . . . . . . . . . . . . . . . . . $0.180 Missouri . . . . . . . . . . . . . . . . . . . . . $0.170 Montana . . . . . . . . . . . . . . . . . . . . . $0.180 Nebraska . . . . . . . . . . . . . . . . . . . . $0.340 Nevada . . . . . . . . . . . . . . . . . . . . . . $0.350 New Hampshire. . . . . . . . . . . . . . . . $0.520 New Jersey . . . . . . . . . . . . . . . . . . . $0.800 New Mexico . . . . . . . . . . . . . . . . . . $0.210 New York . . . . . . . . . . . . . . . . . . . . $1.110 North Carolina . . . . . . . . . . . . . . . . . $0.050 North Dakota. . . . . . . . . . . . . . . . . . $0.440 Ohio . . . . . . . . . . . . . . . . . . . . . . . . $0.240 Oklahoma . . . . . . . . . . . . . . . . . . . . $0.230 Oregon . . . . . . . . . . . . . . . . . . . . . . $0.680 Pennsylvania . . . . . . . . . . . . . . . . . . $0.310 Rhode Island . . . . . . . . . . . . . . . . . . $1.000 South Carolina. . . . . . . . . . . . . . . . . $0.070 South Dakota . . . . . . . . . . . . . . . . . $0.330 Tennessee . . . . . . . . . . . . . . . . . . . . $0.130 Texas . . . . . . . . . . . . . . . . . . . . . . . $0.410 Utah . . . . . . . . . . . . . . . . . . . . . . . . $0.515 Vermont . . . . . . . . . . . . . . . . . . . . . $0.440 Virginia . . . . . . . . . . . . . . . . . . . . . . $0.025 Washington . . . . . . . . . . . . . . . . . . . $1.425 West Virginia . . . . . . . . . . . . . . . . . . $0.170 Wisconsin . . . . . . . . . . . . . . . . . . . . $0.770 Wyoming. . . . . . . . . . . . . . . . . . . . . $0.120

  32. A P P E N D I X Sorted by Tax Rate Sorted Alphabetically by State Name Tax Rate Tax Rate State (per pack of 20) State (per pack of 20) Alabama . . . . . . . . . . . . . . . . . . . . . $0.165 Alaska. . . . . . . . . . . . . . . . . . . . . . . $1.000 Arizona . . . . . . . . . . . . . . . . . . . . . . $0.580 Arkansas . . . . . . . . . . . . . . . . . . . . . $0.315 California . . . . . . . . . . . . . . . . . . . . . $0.870 Colorado . . . . . . . . . . . . . . . . . . . . . $0.200 Connecticut. . . . . . . . . . . . . . . . . . . $0.500 Delaware. . . . . . . . . . . . . . . . . . . . . $0.240 District of Columbia . . . . . . . . . . . . . $0.650 Florida. . . . . . . . . . . . . . . . . . . . . . . $0.339 Georgia . . . . . . . . . . . . . . . . . . . . . . $0.120 Hawaii. . . . . . . . . . . . . . . . . . . . . . . $1.000 Idaho . . . . . . . . . . . . . . . . . . . . . . . $0.280 Illinois . . . . . . . . . . . . . . . . . . . . . . . $0.580 Indiana . . . . . . . . . . . . . . . . . . . . . . $0.155 Iowa . . . . . . . . . . . . . . . . . . . . . . . . $0.360 Kansas . . . . . . . . . . . . . . . . . . . . . . $0.240 Kentucky. . . . . . . . . . . . . . . . . . . . . $0.030 Louisiana. . . . . . . . . . . . . . . . . . . . . $0.240 Maine . . . . . . . . . . . . . . . . . . . . . . . $1.000 Maryland . . . . . . . . . . . . . . . . . . . . . $0.660 Massachusetts . . . . . . . . . . . . . . . . $0.760 Michigan . . . . . . . . . . . . . . . . . . . . . $0.750 Minnesota . . . . . . . . . . . . . . . . . . . . $0.480 Mississippi. . . . . . . . . . . . . . . . . . . . $0.180 Missouri . . . . . . . . . . . . . . . . . . . . . $0.170 Montana . . . . . . . . . . . . . . . . . . . . . $0.180 Nebraska . . . . . . . . . . . . . . . . . . . . $0.340 Nevada . . . . . . . . . . . . . . . . . . . . . . $0.350 New Hampshire. . . . . . . . . . . . . . . . $0.520 New Jersey . . . . . . . . . . . . . . . . . . . $0.800 New Mexico . . . . . . . . . . . . . . . . . . $0.210 New York . . . . . . . . . . . . . . . . . . . . $1.110 North Carolina . . . . . . . . . . . . . . . . . $0.050 North Dakota. . . . . . . . . . . . . . . . . . $0.440 Ohio . . . . . . . . . . . . . . . . . . . . . . . . $0.240 Oklahoma . . . . . . . . . . . . . . . . . . . . $0.230 Oregon . . . . . . . . . . . . . . . . . . . . . . $0.680 Pennsylvania . . . . . . . . . . . . . . . . . . $0.310 Rhode Island . . . . . . . . . . . . . . . . . . $1.000 South Carolina. . . . . . . . . . . . . . . . . $0.070 South Dakota . . . . . . . . . . . . . . . . . $0.330 Tennessee . . . . . . . . . . . . . . . . . . . . $0.130 Texas . . . . . . . . . . . . . . . . . . . . . . . $0.410 Utah . . . . . . . . . . . . . . . . . . . . . . . . $0.515 Vermont . . . . . . . . . . . . . . . . . . . . . $0.440 Virginia . . . . . . . . . . . . . . . . . . . . . . $0.025 Washington . . . . . . . . . . . . . . . . . . . $1.425 West Virginia . . . . . . . . . . . . . . . . . . $0.170 Wisconsin . . . . . . . . . . . . . . . . . . . . $0.770 Wyoming. . . . . . . . . . . . . . . . . . . . . $0.120

  33. Hard Liquor, Beer, and WineTax

  34. Federal Excise Taxes Weird Taxes

  35. The Royal Order of TANSTAA"F"L

  36. Royal Order of TANSTAA"F"L

  37. Royal Order of TANSTAA"F"L

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