Sunday, August 5, 2012

Nice Cartoon: Gucci bag vs Grocery bag---Econ Concepts galore, if you just look for them...

This cartoon (HT: Mike Fladlein) is making a comparison between a Gucci handbag and a bag of groceries. The headline from the newspaper shown in the right panel is "Record Drought".  What is the cartoonist suggesting is the relationship between the drought and the two distinctly different bags?  What economic concepts have you learned about in class can you see in this cartoon?
Source: Mike Fladlein at Mikeroconomics
Also, what can you say about the price elasticity of demand (PED) for each of these "goods"?  Relatively elastic? Inelastic? Unit elastic?

Would it be valid to compare the cross price elasticity of demand (percentage change in Quantity Demand for one of the goods divided by the percentage change in the price of the other good) for these two items to determine if they are substitutes (+) or complements (-)?

These are the things I ponder on a Sunday morning...
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