Economic discussion

ECONOMIC DISCUSSION Name Institution Affiliation Course Date of Submission Economic Discussion It is Ockham Razor`s quote that is best used to explain the price elasticity of demand thus: "One should not increase, beyond what is necessary, the number of entities that are required to explain anything." The determinants of price elasticity of demand have often confused students just like elasticity estimates that are inappropriate and undated. When pricing public goods using the principle of price elasticity of demand, one will first need to consider how elastic or inelastic the demand of public goods is today. If demand for public goods such as homeland security is elastic, then high prices can be charged for those services and the providers of those public goods can leap high revenues and profits from them. The opposite is also true. For the providers of public goods which in most cases is usually the government can use several economic principles to price these public goods. To begin with, it would be imperative to consider the number of close substitutes. It goes without saying that the more close substitutes that are there in the market; the more elastic the demand will be, owing to the fact that users of these public goods will have other alternatives. Second it would be important to consider the cost of switching between products. In some instances switching often involve some costs, a situation that would make demand kind of inelastic. Third is the degree of necessity or whether the good is a luxury good. Needs almost always have an inelastic demand, luxury goods though have elastic demands. Fourth would be looking at the proportion of the income of a customer that is allocated to spending on t...