Explanation, Analysis and Understanding of the Sub-topics, such as, Demand, Supply, Price Elasticity and Income Affects over Customers

Elasticity of demand is the relationship between the demands for a product with respect to its price. Generally, when the demand for a product is high, the price of the product decreases. When demand decreases, prices tend to climb. Products that exhibit the characteristics of elasticity of demand are usually cars, appliances and other luxury items. Items such as clothing, medicine and food are considered to be necessities. Essential items usually possess inelasticity of demand. When this occurs prices do not change significantly.

Income elasticity of demand is used to measure how consumers respond to changes to their income and their buying power or demand of a product. To better understand how changes of income affect consumers decisions to either buy less of a specific product or more of a specific product we use the income elasticity formula. The income elasticity formula is to divide the percentage change of the quantity of a particular product demanded over the percentage of change in a person’s income. The answer will result in either a positive or negative coefficient with a threshold of zero. If the results are a positive coefficient then that specific product is considered a normal/superior good; if the results are a negative coefficient that product is considered an inferior good.

availability of substitutes, and justify how you determine the price elasticity of demand for your firm’s product. b) Explain the factors that affect consumer responsiveness to price changes for this product, using the concept of price

If the product coast a large percentage of the average consumer’s income, people will pay more attention to sale prices because they may be afraid of a fact that if the price keeps rising, they can’t afford it because it is expensive and costs most of their income. It is common that we spend more than $200 on one pair of Nike shoes, which are quite expensive. However, the price of bread is low. Furthermore, one pair of Nike shoes costs more percentage of clients’ income than a piece of bread. If the price declines, people would like to buy more Nike shoes because they can’t afford it in normal time. However, people won’t buy too much bread than before because the bread may go rancid quickly. So people are more sensitive to the price of Nike shoes. As a consequence, all Nike shoes sold in Canada have more elasticity than all bread sold in Canada.

Have you ever wondered how the goods and services you purchase become available to you, and have you ever wondered how the prices are determined? Even though economics involves many concepts, supply and demand, as well as trade, are among the most important forces in an economy because of their effect on prices, consumer behavior and economic growth.

Supply and demand is a fundamental element of economics; it is the main support system of a market economy. Demand can be interpreted by the quantity of a product or service a consumer is desired to acquire at a given time period. Quantity demanded is the amount of product consumers are willing to purchase at a given price; the relationship between price and quantity demanded is commonly known as the demand relationship. Supply however, accounts for how much a market produces for consumers. The quantity supplied refers to the actual amount of a certain good firms are willing to supply to consumers when receiving a certain price. Having limited resources we all have to

The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the

Understanding the fundamental concepts of economics allows us to analyze laws that have a direct bearing on the economy. These laws and theories are essentially the backbone of how economics is used and studied. The law of demand can be expressed by stating that as long as all other factors remain constant, as prices rise, the quantity of demand for that product falls. Conversely, as the price falls, the quantity of demand for that product rises (Colander, 2006, p 91). Price is the tool used that controls how much consumers want based on how much they demand. At any given price a certain quantity of a product is demanded by consumers. As the price decreases, the quantity of the products demanded will increase. This indicates that more individuals demand the good or service as the price is lowered. This can be illustrated using the demand curve. The demand curve is a downward sloping line that illustrates the inversely related relationship of price and quantity demanded.

Elasticity is a measure of the responsiveness of demand to changes in the price of a good or service. In the case of Steam Scot, when the price rises from 4 to 5, demand falls from 60,000 to 40,000 units. The original equilibrium market price of 4 pounds resulted in demand of 60,000 units and this generated revenue of 240,000 pounds. When the prices increased to 5 pounds the resulting demand is 40,000 units, and this generates total revenue of 200,000 pounds. When market price changes from 4 pounds to 5 pounds 40,000 pounds of revenue are lost in this indicates an elastic price elasticity of demand.

Price elasticity of demand is an economic measure that is used to measure the degree of responsiveness of the quantity demanded of a good to change in its price, when all other influences on buyers remain the same.

Elasticity of demand represented as “Ed” is defined as a “measure of the response of a consumer to a change in price on the quantity demanded of a good” (McConnell, 2012). Determinants for elasticity of demand would include the substitutability of a good, proportion of a consumer 's income spent on a good, the nature of the necessity of a good and the time a purchase is under consideration by the consumer. Furthermore, elasticity of demand is calculated with this formula:

Some of the most important knowledge gained for practical purposes concerned the concept and application of supply and demand. Anecdotal evidence of supply and demand can be seen all around us; including the way that gasoline prices increase and decrease as a result of the way oil prices, which resulted in a basic understanding of the underlying concept. Other areas where this can be seen include examples such as the stock market and even web sites such as eBay with the auction of goods. However, the ability to understand the way this operates not only helps to explain the observed outcomes, the ability to use this to help predict potential outcomes for different scenarios is highly useful. The concepts of elasticity and cross elasticity with different influences, such as disposable income and competing products are all

When the price of a good rises the quality demanded falls, if we think about how much does it falls. To figure out by how much it falls we must calculate the price elasticity of demand which is calculate by how responsive demand is to rise in price. Also, the price elasticity of supply measures the responsiveness of quantity supplied to a change in price.

Supply and demand is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy. Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply and demand.

Elasticity of demand is shown when the demands for a service or goods vary according to the price. Cross-price elasticity is shown by a change in the demand for an item relative to the change in the price of another. For substitutes, when there is a price increase of an item, there is an increase in the demand for another item. When viewing complements, if there is an increase in the price of an item, the demand for another item decreases. Income elasticity is shown when there is a change in the demand for a good relative to a change in income. This concept is shown in how people will change their spending habits when their income levels change. For