Week 2 - Economic Perspectives Pt.2

Question 1

What determines Demand?

Answer 1

• Price Point, including complementary goods
• Taste (social media, trends)
• Income
• Wants & Needs
• Substitute goods

Question 2

What determines Supply?

Answer 2

• Cost of production

- Limitations of resources

Question 3

Define Elasticity

Answer 3

The response of the dependent variable (quantity) to changes in the independent variable (price).

Question 4

Explain Elasticity of Demand

Answer 4

It is the percentage change in quantity (demanded) that results from a given percentage change in price. The number is always negative, as one is always decreasing.

Question 5

What is the Formula for Calculating Elasticity of Demand

Answer 5

Q% (Quantity)/ P% (Price)

Question 6

What is Elastic Demand?

Answer 6

When the result of the formula is greater than 1. The elasticity of demand, or demand elasticity, refers to how sensitive demand for a good is compared to changes in other economic factors, such as price or income.

Question 7

What is Unitary Demand?

Answer 7

When the result of the formula is equal to 1.

Question 8

What is Inelastic Demand?

Answer 8

When the result of the formula is less than 1. An inelastic product is defined as one where a change in price does not significantly impact demand for that product.