Associate Level Material Appendix B Price Elasticity and Supply & Demand Fill in the matrix below and describe how changes in price or quantity of the goods and services affect either supply or demand and the equilibrium price.
Use the graphs from your book and the Tomlinson video tutorials as a tool to help you answer questions about the changes in price and quantity EventMarket affected by eventShift in supply, demand, or both. Explain your answer.Change in equilibrium Frozen orange crops in CaliforniaOrange juiceSupply (left)—Not as many available oranges to offer consumers. Price will increase and quantity will decrease.
Hurricanes in the Gulf Coast Fishing Restaurants Supply (left) not as many fish. Demand (right) both will need more to do their jobs. Price will increase while quantity will decrease. Cost of cotton decreases ClothingSupply (right) production costs decreases. Prices decrease and quantity increases. Technology improves efficiency in pasta manufacturingPastaSupply (right) pasta supply increases because of technology.
Prices decrease quantity increases. 1. What do substitutes refer to in economics? Give an example of two substitutes. Items and goods that can replace another and satisfy the initial needs or desire. (Margarine and Butter).
2. Define “Price Elasticity of Demand. ” Give an example. Price elasticity of demand a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in rice.
Example computer when they changed from desktops to lab tops the convenient made higher prices not change demand. Determine if the demand for the following products is price elastic or price inelastic, and explain your answer. In your explanation, be sure to include how the necessity of a good and the availability of substitutes affect the price elasticity of demand in each of these specific cases: •Gasoline as a commodity (Inelastic) Because of its need to consumers to travel, an increase will not make a big impact. Gasoline sold at a local gasoline station (Elastic) Consumers will search for prices that are cheaper. There are many stations. •Hotel rooms for people planning a vacation (Elastic) Consumers will search for the cheaper prices and good service.
There are many hotels available. •Hotel rooms for people on business to meet an important client (Inelastic) it is important for clients to be satisfied so changes can affect the outcome. 3. Define the Law of Demand and the Law of Supply.
Give an example for each.The Law of Demand is an economic law that states that consumers buy more of a good when its price decreases and less when its price increases. Example: People buy more orange juice when it’s on sale then when regular price is higher. The Law of Supply a microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by supplier’s increases and vice versa. Example: Baby formula is essential for them and companies supply it a basic price.
