explain howprice elasticity of demand affects product

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target competency

explain how price elasticity of demand affects a product


folk wisdom has it that when people lose their jobs, they drown their sorrows in drink. economists have long challenged this assumption citing two reasons:

· overall consumption of alcohol does not increase during recessions.

· falling incomes during a recession make it harder to people to increase their purchases of booze.

two economists took a close look at a broad survey of more than 50,000 persons each year from 1987 to 1999. they found that drinkers do reduce their consumption substantially in economic downturns.

· a one-percentage-point increase in unemployment in a state decreased alcohol consumption by drinkers by more than 3 percent.

· a one-percentage-point rise in the national unemployment rate decreased alcohol consumption by 4 percent.

source: “out of work and in the bar?” business week, november 12, 2001, p. 36.


1. explain why it i s or is not possible to calculate the elasticity of demand for alcohol consumption for the state situation?

2. explain why it is or is not possible to calculate the elasticity of demand for alcohol consumption for the federal situation.

3. were the demands calculated above elastic or inelastic?

4. do you think that alcohol abuse will become such an increasing problem during recessions that would cause some government action to take place?

write your answers in a paper of no fewer than 500 words.

submit this task to your instructor using the task dropbox labeled "lp2: unemployment & drinking."

this task is worth _50_ points and will be graded according to the following scoring guide.

this is my instructors email t help me and i am having problems understanding why this is ed and not ei.

email: tammy, this is an ed problem, not an ei problem. you don't know the income level. just substitute the unemployment rate for the price of alcohol.

after you do that, you should base your last answer on the product's elasticity.
i have even enclosed my a draft of my paper.
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