Understanding Demand, Supply, and Elasticity

What do demand and supply balance?

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Demand and supply affect market price by:

• Increasing demand raises prices, while increasing supply lowers prices.

• Increasing demand lowers prices, while increasing supply raises prices.

• Both demand and supply have no effect on market prices.

• Demand and supply always increase market prices.

What did we learn about changes in quantity demanded and supplied?

• We learned that changes in quantity demanded and supplied are always equal.

• We learned that changes in quantity demanded and supplied are influenced by price.

• We learned that changes in quantity demanded and supplied are independent of each other.

• We learned that changes in quantity demanded and supplied are constant over time.

Studying elasticity will help us understand:

• the behavior of materials under stress

• the color of materials

• the taste of materials

• the weight of materials

The price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in the price of that good. What are its determinants?

• Availability of substitutes, necessity vs luxury, proportion of income spent on the good, time period considered

• Color of the product, brand name, packaging style, advertising

• Weather conditions, geographical location, cultural factors, historical significance

• Government policies, international trade agreements, political stability, economic growth

Changes in income and the prices of other goods affect elasticity in which of the following ways?

• They increase elasticity.

• They decrease elasticity.

• They have no effect on elasticity.

• They can either increase or decrease elasticity depending on the context.

The price elasticity of supply is:

• a measure of how much the quantity supplied of a good responds to a change in the price of that good

• a measure of how much the quantity demanded of a good responds to a change in the price of that good

• the percentage change in quantity supplied divided by the percentage change in quantity demanded

• the percentage change in price divided by the percentage change in quantity supplied

The price elasticity of demand and supply relate to each other in which of the following ways?

• They are always equal.

• They are inversely related.

• They are unrelated.

• They are directly related.

What is one of the determinants of Price Elasticity of Demand?

• The existence of substitutes

• The color of the product

• The brand name

• The location of the store

Fill in the blank: The share of the budget spent on the good is a determinant of _________.

• Price Elasticity of Demand

• Income Elasticity of Demand

• Cross Elasticity of Demand

• Supply Elasticity