ECON 2106 Lecture 4: ECON 2106 - MICROECONOMICS

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cpflora

26 Dec 2022

School

WGTC

Department

Economics

Course

ECON 2106

Professor

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Document Summary

Econ 2106 - microeconomics: gas prices fluctuate often and in both directions. Use the various determinants of elasticity to explain your answer: elasticity is determined by many factors such as the nature of a good, availability of substitute, necessity vs. luxury, and time. Given these factors, i think that a consumer"s responsiveness would change depending upon if the supply of gas is high or low. If the supply in gas decreases and prices increase, i think consumers would limit the amount of gas they purchase. Can you think of any industries where there are no (or very low) entry barriers: a product i can think of that i purchase without caring for the brand would be bananas. An industry where there is little, or no entry barriers would be technology. Explain how they abuse their power and describe the impact on consumers.

Related Questions

Discussion #1

The law of demand states that a fall in the price of a good raises the quantity demanded, and the increase in price leads to a decrease in quantity demanded. The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price, and the percentage change in quantity demanded is greater than the percentage change in price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price, which indicates that the percentage in price is greater than the percentage in quantity demanded.

However, the extent of responsiveness of quantity demanded to a change in price depends on the nature of a particular good or service in the market. The price elasticity of demand partly depends on the availability of close substitutes. When a large number of substitutes are available, consumers respond to a higher price of a good by buying more of the substitute goods and less of the relatively more expensive good. In addition, goods or services that are considered necessities tend to have less elastic (more inelastic) demand, whereas goods or services that are considered luxuries have more elastic (less inelastic) demands.

Explain why the demand for the good or service provided by the organization you work for is elastic or inelastic. How does this influence pricing decisions?
Provide examples on how the availability of close substitutes affects price elasticity of demand.
Give specific examples of necessities or luxuries, and explain how they affect price elasticity of goods or services.

Please answer ALL bulletins and place the answers under the correct bulletin.

If the price elasticity of demand is elastic then

a. Ed<1.

b. consumers are not very responsive to a price increase.

c. an increase in the price will increase total revenue.

d. there are a large number of substitute products available.