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Sign up to view the full version. This is the end of the preview. Sign up to access the rest of the document. Unformatted text preview: Challenges 1. Lets apply the economics of taxation to romantic relationships. (a).What does it mean to have an inelastic demand for your boyfriend or girlfriend? How about an elastic demand? GHOST ANSWER: 6 An inelastic demand means you cant live without him or her. An elastic demand means that there are good substitutes for the current boyfriend or girlfriend. (b).Sometimes relationships have taxes. Suppose that you and your boyfriend or girlfriend live one hour apart.
This technical shorthand works for both the price elasticity of demand and the price elasticity of supply, because the negative value of the price elasticity of demand is ignored. If the negative sign on the price elasticity of demand is not ignored, then relatively inelastic demand is specified as -1 &lt E &lt 0.