Will Bury’s Price Elasticity Scenario

Topics: Supply and demand, Price elasticity of demand, Elasticity Pages: 3 (729 words) Published: August 1, 2009
The economic concepts founded in Will Bury’s Price Elasticity Scenario are the following: 1. Supply and Demand
One of the most fundamental concepts of economics and the backbone of a market economy is the concept of supply and demand. Demand shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time. (McConnell & Brue, 2004) The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good. Therefore, there is a negative relationship between price and quantity demanded. The basic determinants of demand which affect purchases are: •Consumers’ preferences

The number of consumers in the market
Consumers’ incomes
The price of related goods
Consumers’ expectations about future prices and incomes Supply shows the amount of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period. (McConnell & Brue, 2004) The law of supply states that as price rises, the quantity supplied rises; as price falls, the quantity supplied falls. Therefore, there is a positive relationship between price and quantity supplied. The basic determinants of supply are: •Resource price

Taxes and subsides
Prices of other goods
Price expectation
The number of sellers in the market
In order to understand the effect of price on volume demanded, Will Bury must understand the theory of supply and demand. When he will put these two concepts together, he will identify the market equilibrium with the price and quantity at the intersection of the demand and supply relations. That will be the price just high enough that quantity demanded is equal to quantity supplied, and the quantity corresponding to that price. 2. Elasticity of Demand and Supply

The degree to which a demand or supply reacts to a price change is...

References: McConnell, C. R., & Brue, S. L. (2004). Economics: Principles, Problems, and Policies (16th ed.). New York: McGraw Hill/Irwin
University of Phoenix Material: Will Bury’s Price Elasticity Scenario. Retrieved June 6, 2009 from: https://ecampus.phoenix.edu/classroom/ic/classroom.aspx
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