Week 2
Discussion
DQ 1 Marginal Rate of Substitution. What is the marginal
rate of substitution (MRS) and why does it diminish as the consumer substitutes
one product for another? Use examples to illustrate
DQ 2 Demand Elasticity. Please, read the article Hainer, R.
(2010), provided in the required readings section for this week. The tobacco
industry is a prime example to consider when talking about price elasticity of
demand. While nicotine use can be addictive for many users, it is not addictive
for the so-called “social smokers”.
What can we say about the price elasticity of demand for
nicotine products (such as cigarettes, pipes, tobacco) in the group of nicotine
addicted users, versus the group of “social smokers”? Can we say
whose demand is likely to be more elastic? Why?
