[TEA-T3] CIA4U Anal ...

Lesson 1.12 - Elasticity of Demand and Supply

• PPT File
• Short Quiz
• Perfect (or pure) competition

   A rare market structure characterized by many sellers (selling exactly the same product) and many buyers, no barriers to entry into the market for new firms, and perfect knowledge of prices (so there are no price differences and no individual can influence them). 
  

  
  

  Price elasticity of demand (PED)

   An expression of how much more or less consumers will buy of a product if its price changes. 
  

  
  

  Price elastic

   If the quantity of a good or service bought changes a lot when price rises or falls, it is said to be price elastic. 
  

  
  

  Price inelastic
   If the quantity of a good or service bought does not change much when price rises or falls, it is said to be price inelastic. 
  

  
  

  Sales revenues
   The amount of money realized from selling goods or services in the normal operations of a company in a specified period. 

  
  

• Discussion Forum - Topic

  For which of the following products would demand be elastic? Inelastic? Unitary? Explain why in each case. Products: (a) beef, (b) steak, (c) public transportation, (d) gasoline, (e) pencils, and (f) housing.
  

  
  

  A seller finds out that the PED coefficient for the product being sold is 1.5. Would it be better to lower the price or raise the price to gain more sales revenue? How might the seller’s sales strategy change if the PED coefficient for the product were 0.8?
  

  
  

• Demand and Supply Elasticity curves File
• Notes on Elasticity demand File
• Notes elasticity of supply File
• Elasticity of demand and supply-assessment File
• Practice questions True False File
• Practice questions File
• Answers to practice questions File
• Lesson Exit Card Questionnaire

  Students to complete this after you've finished all activities/tasks in today's lesson.

• Practice question File
• Practice question answers File
• answer to mcq

  1. Sales revenue for goods with elastic demand rises when price falls.
     True

     • For elastic demand, a price drop leads to a proportionally larger increase in quantity demanded, raising revenue.

  2. If a supplier can increase production easily when prices rise, the more elastic the supply is said to be.
     True

     • Elastic supply means producers can respond quickly to price changes by increasing or decreasing production.

  3. In general, goods classified as inelastic take up a large portion of people’s budgets.
     False

     • Inelastic goods typically take up a small portion of budgets (e.g., necessities like salt or toothpaste).

  4. Elasticity of demand measures how sensitive the quantity bought of a good to a change in its price.
     True

     • This is the definition of price elasticity of demand.

  5. The equilibrium price in a market is the only acceptable compromise between buyers and sellers.
     False

     • While equilibrium price balances quantity demanded and supplied, it's not necessarily the only acceptable compromise; markets may operate temporarily out of equilibrium.

  6. If the price of good A (a substitute for good B) increases, the demand for good B will decrease.
     False

     • If the price of a substitute (good A) increases, the demand for good B will increase as consumers switch to the cheaper option.

  7. Demand for a product depends on its price.
     True

     • Price is a primary determinant of demand, though other factors (e.g., income, preferences) also play a role.

  8. The quantity supplied of a product will increase or decrease when price changes.
     True

     • Price changes affect the willingness of suppliers to produce, following the law of supply.

  9. The quantity demanded of a product will increase or decrease when price changes.
     True

     • According to the law of demand, quantity demanded inversely changes with price.

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