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
OilSupply (left) Oil supplies decrease as hurricanes make it harder to get access to oil.Prices increase and quantity will decrease. Cost of cotton decreases
Cotton supplies in clothing manufacturingSupply (right) - Cotton products become more affordable as the prices go down.Prices decrease and quantity increases. Technology improves efficiency in pasta manufacturing
Pasta salesSupply (right). Pasta manufacturing increases.Prices decrease and quantities increase.
1.What do substitutes refer to in economics? Give an example of two substitutes. In economy, substitutes refer to similar goods or products that when the price of one falls, there is a leftward shift toward the other product, such as Atm’s and bank tellers.
2.Define “Price Elasticity of Demand.” Give an example. In economics, price elasticity of demand is a measurement of the demand of a product or good to changes in the price of the products or goods, such as coffee and tea. Substitutes and income influence the elasticity of a good or product. Caffeine itself if price inelastic as it has no substitute and consumers will pay whatever price they have to for their morning coffee.
3.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...