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
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 manufacturing
PastaSupply (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 price. 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...