Economics: Supply and Demand and Price Elasticity

First, a quick review of Price Elasticity of Demand from lecture on 02/19/09. The definition, of Price Elasticity of Demand (PED) is: Price Elasticity of Demand = Percentage Change in Quantity Demanded = %ΔQD Percentage Change in Price

good idea of what part of a demand curve looks like if it is to make

1. When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this product is ( )

2. When the percentage change in the quantity demanded equals the percentage change in price, then demand is

The fact that price and quantity demanded are related negatively illustrates the a.law of supply.b.law of quantity supply.c.law of demand.d.law of quantity demanded.e.point that some facts are unobservable. ANS

a.) Draw and properly label the demand and supply graphs (this means you must label the axes and any lines you include on the graph).

15. Consumer’s income increased by 20% while price fell by 10% - all at the same time. As a

cause a leftward shift of the new auto demand curve because they are a normal good. c.

Explain the most important characteristic in perfect competition, monopolistic competition, oligopoly, and monopolies and relate the characteristic to how these firms can make profits in the short run. In your analysis, make sure to relate an example for each of the market structures listed and how it relates to the particular characteristics.

Describe the demand curve shift (rightward or leftward) about how the following changes would affect the demand for inpatient services at a hospital in a large city. A. Average real income in the community increases. B. In an attempt to cut costs, the largest employer in the area increases the coinsurance rate for employee health coverage from 10 percent to 20 percent. C. The hospital relocates from the center of the city, where a majority of the people live, to a suburb. D. A number of physicians in the area join together and open up a discount-price walk-in clinic; the cross-price elasticity of demand between physician

To summarize the concept, when the price of a product falls, the quantity demanded of the product will increase, and conversely, when the price of a product increases, the quantity demanded of the product will decrease, where all other relevant factors are constant. (Glen, 2012).

(Demand Under Perfect Competition) What type of demand curve does a perfectly competitive firm face Why

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

T 's Jean Shop sells designer jeans. The latest trend setter has been Capri cuffed blue jeans. The demand for the Capri jeans has been very high with teenagers and young women. The business has increased its supply of Capri jeans due to the high demand. The owner, Terri Johnson, contemplates increasing the price from $9.00 to $10.00. Ms. Johnson needs to know the response of the consumers to the increased price. According to McConnell and Brue (2004), the Price Elasticity of Demand measures the rate of response of quantity demanded due to a price change (p. 1).

Elasticity of demand helps the sales manager in fixing the price of his product, deciding the sales, pricing policies and optimal price for their products. The evaluation of this measure is a useful tool for firms in making decisions about pricing and production which will determine the total