poverty and bans
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1. Compare a ban on trans fats to a ban on cocaine. What do the markets look like? How are they different? Which ban would be easier to enforce? Explain.
2. What would it mean if the poverty income level of the United States were applied to Mexico?
3.If the incidence of poverty decreases during periods when the economy is growing and increases during periods when the economy is in recession, what government policies might be used to reduce poverty most effectively?
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Solution Summary
1. Compare a ban on trans fats to a ban on cocaine. What do the markets look like? How are they different? Which ban would be easier to enforce? Explain.
2. What would it mean if the poverty income level of the United States were applied to Mexico?
3.If the incidence of poverty decreases during periods when the economy is growing and increases during periods when the economy is in recession, what government policies might be used to reduce poverty most effectively?
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1. A ban in trans fats is easier to enforce. The market for trans fats is one that works with complements. We eat trans fats because people put them in our processed foods. It is also a market of substitutes, there are other fats that can be used in the same processes. In essence, there is no consumer market specifically for trans fats. We have a market for processed foods which creates an indirect demand for trans fats. The demand for trans fats is driven by the preferences of processing food companies.
On the other hand, Cocaine is a product on its own, with consumer demand. And, that demand is very loyal, and inelastic, because of addiction to the substance. Furthermore, because the profits are so high, there is an illegal system of ...
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