Microeconomics question that is stumping me.?

Question

Use an elasticity concept to explain each of the following observations: b.Cement is the primary building material in mexico. After new technology makes cement cheaper to produce, the supply curve for the mexican cement industry becomes relatively flatter.

C. Some goods that were once considered luxuries, like a telephone, are now considered virtual necessities. As a result, the demand curve for telephone services has become steeper over time.

D. Consumers in a less developed country like Guatemala spend proportionately more of their income on equipment for producing things at home, like sewing machines, than consumers in a more developed country like Canada.

Answer 1

Hi,

You have 2 main concepts about elasticity: 1) inelastic 2) elastic....you also have perfectly elastic and inelastic. Inelastic is when no matter what the price of the article, people will still spend to have it. They are usually necessities. Elastic is when the price of a product say, goes up for the same product, and then people will spend less. We then say the product is elastic.

Now for your question:

B) Cement being the primary building material in Mexico, it's more on the inelastic side. People will buy it even if the price rises. But since the price is going down, people will be buying more, therefore it is becoming more elastic (steeper)

C)Vital necessities = inelastic. They need the phone, it's now a necessity. If it's a necessity, then no matter how the price of the product fluctuates, the people will still buy it like they did when it was cheaper.

D) Guatemala's economy depends on equipment to produce things, so it will be more inelastic, then say Canada, where the latter has the choice to decide what they spend their money on.

Hope this helps,

-Sarah

Answer 2

Wow...I should listen better in school.  All I can provide you with is a helpful link.

Good luck Ally