Egt1 Task 3 Essay Example
309.1.2 Supply and Demand 1) Discuss elasticity of demand as it pertains to elastic, unit, and inelastic demand. a) Elasticity of demand are circumstance at which a good or service varies according to prices. These circumstances measures consumers reaction and how they respond to the changes in price by changing the quantity demanded. (PE-of-D = (% Change in Quantity Demanded/% Change in Price)) – When the price for a number of units decreases from positive units pre-dollars to negative units per-dollars, the quantity of units sold increases. i) With regard to elastic demand, the change in quantity demanded due to the price change would increase or be larger. ii) With regard to inelastic demand, the change in quantity demanded due to price change would decrease or be smaller. iii) With unit, the quantity doesn't change, which mean the quantity change at the same rate of price. 2) Discuss cross price elasticity as it pertains to substitute goods and complementary goods. b) Cross price elasticity is a means use to measures or determine quantity demand when customer chose one good due to price change of another good. CPE-of-D = ((% Change in Quantity Demand for Good X)/(% Change in Price for Good Y). iv) Substitute goods such as, Mayonnaise and Miracle whip would be related products, because both products are use as a type of sandwich spread. If the price of (Mayonnaise) rises, the quantity for demanded Miracle whip increases, making cross elasticity of demand positive. v) On the other hand, with complementary goods such as hotdogs and hotdogs buns. If the price of hotdogs increase, then no one would by buns since both complementary making the cross elasticity of demand negative. 3) Discuss income elasticity as it pertains to inferior goods and to normal goods (sometimes also called superior goods). c) Income elasticity of demand measure change due to income only. If a person