For this discussion, please make yourself the CEO of the following hypothetical companies: We Build Big—We Build Big is one of the largest developers of a new residential structures in the United States. We Build Big builds everything from apartment complexes to new single-family homes. Critical materials such as lumber, gypsum board, and fabricated metal are largely imported. At We Build Big, we know that our production process, the supply curve, is relatively inelastic. The concern over profits is that the price elasticity of demand for housing is 1.0. In your discussion post, address the following prompts within the context of your chosen hypothetical company of which you are the CEO: Is the demand curve for your product relatively elastic, inelastic, or unitary elastic? Demonstrate this for your company's product by how much the quantity demanded will change if you pass on the 25% increase in cost from the tariff as a price increase for your product. In other words, show your calculation of the percentage change in the quantity demanded given a 25% change in the price. 

Given your company's price elasticity of supply and price elasticity of demand, make a statement for your board of directors as to the potential impact on profits. Who will pay the larger share of the tariff: your firm or your customers?

Answer rating: 100% (QA)

In this company the demand curve is unitary elastic This is because t... View the full answer