1. The simulation illustrates a number of different economic concepts. The relationship between supply, demand and price is highlighted. The simulation shows what happens under normal conditions when the price of a good changes. For example, when the price increased the supply of the good increased but the demand fell. As a result, the market was no longer in a state of equilibrium (Riley, 2012). Thus, the concept of supply-demand equilibrium was identified. This is a microeconomic concept, following from the definition of microeconomics as the study of economics relating to individual decision-making (NetMBA, 2010).
The simulation, when discussing the issue of supply, price and demand also touched on the issue of price elasticity of demand. The price elasticity of demand for a product determines by how much the demand for the product drops when the price increases or gains when the price decreases. This statistic the elasticity is different for all types of goods and it can change as the price changes even. For example, we learn that discretionary purchases tend to have a higher price elasticity of demand than non-discretionary goods. For goods that have a combination of these attributes, elasticity can change. Gasoline is a good example some driving we need to do, but some driving is optional. If the price of gas goes up too high, we might cancel the road trip, but we will still drive to work. Price elasticity of demand can help understand these types of dynamics for
Price elasticity of demand is a Theory of the relationship between a change in the quantity demanded of a
The Supply and Demand simulation was reviewed on the student website demonstrated the concepts of the concepts of microeconomics and macroeconomics. The principles of microeconomics and macroeconomics were explained and applied throughout the simulation demonstrate the rationale for the shifts in the supply and demand curve. Each shift is analyzed showing the effects of the equilibrium price, quantity, and decision making process for the simulated company represented. The concepts encountered in the simulation provide an opportunity to better understand how each can be applied to my current workplace. The Scenario provides an
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.
Students at San Pasqual High School created a music video outlining the major concepts of microeconomics while at the same time relating each lesson to the real world, albeit in a humorous manner. The application of these ideas in the video ranged from determining the price of gas to finding a dance partner. The concepts addressed by the students including market structures, government intervention, elasticity, and scarcity, that all hold value in everyday life and an understanding of their importance can contribute significant benefits to the power of the consumer within the market.
Jacobs Industries' only product is an industrial chemical that can be mixed with air to form a foam that is:
The advertising strategy was also to be an immediate market follower. J.D.B.T.’s advertisements were modified by comparing them to the top rated brands’ advertisements. This worked well until R&D came into effect. Other companies were able to advertise titles such as Highest Performance Processor, and Technical Leader Most R&D. We had a decline in our advertising because we did not strategize in the beginning to invest in the R&D as fully as other companies.
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.
The article that will be used for this analysis is “Supply, demand, and the Internet-economic lessons for microeconomic principles courses” by Fred Englander and Ronald L. Moy. There will be definitions for the following economics, microeconomics, Law of supply and the Law of demand. Another subject that will be discussed is the identification of factors that lead to the changes in supply and demand. In order to better understand what is being discussed going to start with the definitions.
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.
Accordingly, we will first "analyze" competitive markets, by discussing demand and supply separately. Then we will try to put them back together (synthesize them) in order to understand the working of competitive markets.
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.
II. ESSAY QUESTIONS. Answer any TWO questions. Answer all parts of each question that you choose.