Supply & Demand, and Price Elasticity

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.

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.

5) Elasticity – elastic; as price changes, acceptable price is a key criterion when consumers decide on a product.

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

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

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.

Based on the above description, forms of elasticity will affect business decisions and pricing strategies differently depending on the nature and type of products or services being offered. Business organizations whose product offerings have elastic and perfectly elastic price elasticities of demand should not attempt to raise prices of their products because it will cause the quantity demanded and consequently total revenues to drop drastically. Businesses can there use the price elasticities of demand to determine whether the proposed changes in their prices will raise or reduce their total revenue. The following expression may be useful in helping business organizations to determine the impacts of elasticities on their total revenues based on the suggested price changes.

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.

When price elasticity of demand is elastic, the coefficient will be greater than one. When a percent price change occurs quantity demanded responds strongly there will be a large change in quantities consumers purchase. There is price sensitive in this scenario. If price elasticity of demanded is inelastic the coefficient will be less than one. When a percent price change occurs quantity demanded does not respond strongly then there is a slight change in quantities consumers will purchase. There a weak price sensitive in this scenario. Lastly, if price elasticity of demanded is unit elastic the coefficient will be equal to one. Whenever there is a percent change in price there is an equally matched percent change in quantity demanded. This scenario is rare.

Demand and supply is an economic system and fundamental concepts for economics who as determined the price of market. It was conclusion, the unit price level of a good essentially was determined by the point who demands and supply was intercept in a same level and same point. The price system only working in a market economy if they’re having a free choice with the market.

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.

Supply and demand is an economic concept or principle that is paramount to illustrating the very close relationship existent between sellers, products, prices, and consumers. As explained by Mankiw, “supply and demand are the forces that make market economies work” (Mankiw, 2014, p. 65). This theory describes the unique way in which consumers and sellers interact. This theory incorporates important ideas such as; quantity demanded and supplied, the laws of demand and supply, demand curves, elasticity, equilibrium, and equilibrium price.

Supply and demand is a fundamental factor in shaping the character of the marketplace. A demand refers to the specific quantity of a product /good or service that people are willing and able to buy at given price level, where supply of a good or service represents how much quantity people are willing and able to offer for sale at given price-level. There are various factors that demand and supply of a good or service depend on. Demand of a product depends on the price of the product, number of buyers in the market, tastes and preferences of consumer, consumer’s income, consumer expectations and prices of related commodities. Supply of a product depends on the price of that product, number of sellers in the market, technology, input