According to the law of demand, if price increases, quantity demanded of a good or service will decrease or vice versa. Price elasticity of demand tells us how much quantity demanded will decrease when price increases or how much quantity demanded will increase if price decreases.
.
Make sure to include the following:
• Explain the concept of elasticity in markets using a formula
• Explain the relationship between the price elasticity of demand and total revenue using a formula
• What are the impacts of various forms of elasticities (include elastic, inelastic, unit elastic) on business decisions and strategies to maximize profit? Explain your responses using empirical examples and formulas
• Is the price elasticity of demand or supply more elastic over a shorter or a longer period of time? Why? Give examples.
• Explain the impacts of market failures on demand
• Explain the impacts of market failures on supply
• What are the impacts of market imperfections (failures) on the price elasticities of demand and supply? How can these problems be alleviated through supply? How can these problems be alleviated through demand?
• What are the impacts of government imperfections (failures) on the price elasticities of demand and supply? How can these problems be alleviated through supply? How can these problems be alleviated through demand?
