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ECON 312 Week 2 Discussion
· Demand, Supply, and Market Equilibrium
Think
about a product that you have purchased recently (e.g. soda, diapers, takeout
meals, milk, shoes, manicure/pedicure, video game, etc.). Explain how the law
of demand affected your purchase. Give specific examples of how the
determinants of demand and supply affect this product (T-I-P-E-N and
P-R-E-S-T). What happens to the demand curve and the supply curve when any of
these determinants change? Give examples of scenarios that would cause a change
in demand versus a movement along the same demand curve and supply curve for
this product. Discuss the new equilibrium price and quantity that result from
these changes. Can you demonstrate some of these changes graphically?
· Price Elasticity of Demand
Think
of another good that you have purchased recently (or you could continue with
the good you selected in TDA I). Be specific (e.g. is it breakfast cereal in
general or Cheerios cereal specifically). If the price of this item increases,
how would this affect the quantity of the good that you consume? Is the Demand
for this good Price elastic or Price inelastic? Justify your
classification by talking about the determinants of elasticity as they apply to
this product. Say price is on the rise for this product and you are the manager
of a store, would you be thrilled to be selling this product? Under what
circumstances would you want to own a business that sells this product? In
other words, how does an increase in price for this good affect your Total
Revenue? Using specific examples, relate the concepts of Cross Elasticity and
Income Elasticity to this product.
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