Xeco 212 Appendix B Essay
(6 points each for all 5 questions)
Price Elasticity and Supply & Demand
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
|Event |Market affected by event |Shift in supply, demand, or both. |Change in equilibrium |
| | |Explain your answer. | |
|Frozen …show more content…
| | |pasta. | |
1. What do substitutes refer to in economics? Give an example of two substitutes. In Economics, substitutes take the place of another still satisfying the buyer. Buyer makes the choice between the two causing the buyer to choose which one the buyer prefers. For example, vehicles can be substituted with public transportation. Another example is vehicle freight can substitute train freight. Trains are cheaper but cannot do direct point-to-point delivery like delivery vehicles can.
2. Define “Price Elasticity of Demand.” Give an example.
The price elasticity of demand is used to measure the responsiveness of quantity demanded to a change in price, with all the other factors kept constant.
Price Elasticity of Demand, Ed = Percentage change in quantity demanded Percentage change in price
For example, if the price of flour goes up by 1%, and as a result sales fall by 2%, the price elasticity of demand for flour is -2%/1% = -2.
3. Determine if the demand for the