AP Econ-Lee-03

In South Korea, tax on oil exceeds the prime cost. In other word, half the price consummers pay is tax for the government. The main reason is that international market price has been decreasing (because of increasing supply) while tax is not changed. The biggest proportion of the tax is from transportation fee.

AP Econ-Lee-02

Elasticity is responsiveness of quantity demanded to price changes, and it affect decisions. For instance, since quantity demanded of inelastic products, such as
coffee and drugs, is not sensitive to price changes, firms may raise the price to increase profit. Elasticity can be applied to social issues. Some economists argue
for dug control via legalization. It may sound bad because it gives free access to anyone, but economist's view is interesting and understandable, too. Nobel
laureate Milton Friedman said the legalization of drugs would increase the supply thus the price drops, but price change would not cahnge the quantity consumed
because of its almost perfectly inelastic demand. Sin taxation and any other government restrictions do not prevent poor from buying. On the other hand, lower prices
would reduce profits for producers and incentives to attract consumers with free samples and other aggressive marketing techniques, which can prevent people becoming
severely addicted. However, these addictions starts at young age. If sin taxes are gone, price would drop which makes teenagers easy to get the drugs. This is very
controversial issue that economist view give different opinion.