Elasticity And Recession

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Elasticity and Recession Rob Lowe got a job selling luxury salmon after attending university and soon, during the recession of Britain (1991-1994) lost his job and got a new one working for Marlboro selling cigarettes. This was a good new job to chose because in a time when there is an economic growth rather than recession, working for goods which are elastic YED, such as luxury salmon, would be favorable over those which are unitary YED, such as cigarettes. In order to explain why Rob Lowe was better off working for Marlboro over selling luxury salmon during recession, one must know the circumstances of recession. A recession can be defined as a significant drop in economic activity throughout an economy. This affects the GDP, real income, wholesale-retail sales, employment, and industrial production. So, to relate this to Rob Lowe’s situation, we can see that because people are making less money and unemployment is high, the likeliness of people going to high end restaurants where luxury salmon is sold, decreases. Luxury salmon is what, economically, would be called an elastic good. The elasticity of demand for a good explains the changes in a demand for a certain good in relation to the changes in income depending on whether the good is elastic, inelastic, or unitary. In other words, the demand for luxury salmon during a recession would dramatically drop. Yet, on the other hand, the demand for a unitary good, like cigarettes, would essentially remain the same. A unitary good is one which is in between an elastic good and an inelastic good. Once the recession started, Rob Lowe was very smart to have switched to working for Marlboro for multiple reasons. Firstly, Marlboro has very consistent sales with little or no relation to the current economic changes. Most likely, this is caused by the fact that their product is highly addictive making it less likely

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