Applications: Price Elasticity Real Life Example

Question 1

In the agricultural market what happens if supply increases

Answer 1

price decreases a lot, quantity increases by a small ammount
supply increase occurs slowly over time as tech improves

Question 2

what is demand in the agricultural market

Answer 2

demand is relatively inelastic

Question 3

if supply increases how does this affect the whole agricultural sector

Answer 3

when demand is inelastic and an increase in production causes large price drop and small quantity rise = the total income recieved by the agricultural sector falls

Question 4

what is supply in the housing market

Answer 4

supply of land is relatively inelastic

Question 5

In the agricultural market what happens if demand increases

Answer 5

if demand increases = large jump in price, small rise in qunatity.
demand rises quickly due to rising incomes and populations but housing takes a lot of time to produce/construct

Question 6

what happens to the supply curve in ag market

Answer 6

moves to right

Question 7

what happens to demand curve in housing market

Answer 7

moves to right