Understanding Market Dynamics

What is price elasticity of demand?

• A measure of how quantity demanded responds to price changes

• A measure of how supply responds to price changes

• A measure of market equilibrium

• A measure of production costs

What happens when demand is elastic?

• Consumers are sensitive to price changes

• Consumers are insensitive to price changes

• Supply increases

• Supply decreases

Which factor does NOT affect supply?

• Consumer preferences

• Production costs

• Technological advancements

• Availability of resources

What occurs at market equilibrium?

• Quantity supplied equals quantity demanded

• Supply exceeds demand

• Demand exceeds supply

• Prices continue to fluctuate

Why is understanding market dynamics important?

• It helps in making informed decisions

• It guarantees profit

• It eliminates competition

• It ensures constant prices