Supply and Demand and Price Elasticity
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- Date Submitted: 06/19/2010 04:07 PM
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Supply and Demand and Price Elasticity
ECO/212
Supply and Demand and Price Elasticity
The purpose of this paper is to research supply and demand. The basic concepts team D will examine include:
1. Explaining what causes changes in supply and demand.
2. Determine how a change in price and quantity influence market equilibrium.
3. Describe how the necessity of a good and the availability of a substitution affect price elasticity.
4. Compare and contrast market systems and the role of an economist within these systems.
Supply and Demand
Supply is defined as the amount of product a producer is willing to provide or sell. Individual supply is the amount of product offered at different prices at a given time by a seller. The components that cause changes in supply are the price of the product, the price of input goods, technology, taxes and subsidies, and expectations about the future market price. The law of supply is the amount of the products offered by the sellers, directly related to prices of all things being equal (ceteris paribus). An example of a cause that would change supply is the change in the cost of supplies and resources: if the cost goes up, producers will decrease their supply.
Demand describes a consumer’s desire and willingness to pay a price for a specific good or service. The components that cause changes in demand are competition, price, income, personal taste, substitute goods, complimentary goods, marginal costs, marginal benefits and any associated opportunity cost. The law of demand states that all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa. If the price of movie tickets were to rise 20% the demand for tickets would be lower.
The necessity of a good and the availability of substitutions influence price elasticity. Tomlinson (2009) defines elasticity of demand as the percentage change in the quantity...
ECO/212
Supply and Demand and Price Elasticity
The purpose of this paper is to research supply and demand. The basic concepts team D will examine include:
1. Explaining what causes changes in supply and demand.
2. Determine how a change in price and quantity influence market equilibrium.
3. Describe how the necessity of a good and the availability of a substitution affect price elasticity.
4. Compare and contrast market systems and the role of an economist within these systems.
Supply and Demand
Supply is defined as the amount of product a producer is willing to provide or sell. Individual supply is the amount of product offered at different prices at a given time by a seller. The components that cause changes in supply are the price of the product, the price of input goods, technology, taxes and subsidies, and expectations about the future market price. The law of supply is the amount of the products offered by the sellers, directly related to prices of all things being equal (ceteris paribus). An example of a cause that would change supply is the change in the cost of supplies and resources: if the cost goes up, producers will decrease their supply.
Demand describes a consumer’s desire and willingness to pay a price for a specific good or service. The components that cause changes in demand are competition, price, income, personal taste, substitute goods, complimentary goods, marginal costs, marginal benefits and any associated opportunity cost. The law of demand states that all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa. If the price of movie tickets were to rise 20% the demand for tickets would be lower.
The necessity of a good and the availability of substitutions influence price elasticity. Tomlinson (2009) defines elasticity of demand as the percentage change in the quantity...