Supply & Demand, and Price Elasticity

1356 Words Jun 6th, 2009 6 Pages
Supply & Demand, and Price Elasticity
All things in our society are connected in some way, for example, how humans relate to each other. Complex ideas and analysis are not without their own set of unique connections. The intricate theories of economics are a prime example of this connection. To gain an accurate understanding of how supply and demand are connected, and its role within the market, one must analyze the functions of each as separate entities, and how they relate to economics as a whole.
To begin analysis, one must examine what causes change between supply and demand. Once this has been achieved, investigating how changes in price and quantity influence market equilibrium, and how the necessity of a good and the availability
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If the price of the good goes up, the consumer will buy less of the good, if the price of the desired good decreases, the consumer will purchase more of that good. This concept applies to all the variables listed above. A change in price in either direction is going to affect the consumer’s decision to acquire the good. A good way to look at all the variables is isolating each variable to determine the effect of each with respect to the elasticity price. The key to elasticity is that it is a unit-less measure. The exact number of units does not matter; the ratio of the percentage changes in quantity divided by the percentage change in price.
Additionally, time and budget percentages are variables of elasticity price. The longer a consumer has to look for an option to buy the good will determine the effect of the result to elasticity price. A product that requires a large percentage of the consumer’s budget will make the good elastic. The above variables are examples of how necessity of a good can affect the price elasticity of a product.
A competitive market is a group of buyers and sellers of a particular good or service which the individual buyer or seller has no impact on the price of the traded good or service. In the market there are two main systems: demand curve and supply curve. The demand curve shows the relationship between the prices of a good or service that consumers are willing and
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