Supply and demand are a fundamental basis of economics; they help explain the determination of price and output in different markets. The supply curve shows the amount of goods firms are willing to sell at different prices. At higher prices, it becomes more profitable to sell the goods, so supply tends to rise with the …
Definition: Price elasticity of demand (PED) measures the responsiveness of demand after a change in price. Example of PED If price increases by 10% and demand for CDs fell by 20% Then PED = -20/10 = -2.0 If the price of petrol increased from 130p to 140p and demand fell from 10,000 units to 9,900 …
Readers Question: What is the role and function of price in the economy? The price of goods plays a crucial role in determining an efficient distribution of resources in a market system. Price acts as a signal for shortages and surpluses which help firms and consumers respond to changing market conditions. If a good is …
Third Degree Price Discrimination involves charging a different price to different groups of consumers for the same good. These groups of consumers can be identified by particular characteristics such as age, sex, location, time of use. In the real world, third-degree price discrimination is quite common. For a firm to practise price discrimination it requires: …
With any new technology – especially electronic goods (TVs, computers, cameras), we tend to see a sharp fall in price over time. Initially, the new technology is very expensive, and a high percentage of disposable income, but over time, prices tend to fall considerably. There are a number of reasons to explain this fall in …
This is a collection of diagrams for supply and demand. It is mainly for my benefit, so when creating a post, like the price of tea (or when I’m teaching online) I can easily find a suitable diagram to illustrate what is happening. Demand curve A contraction on the demand curve is due to higher …
Price elasticity of supply measures the responsiveness of quantity supplied to a change in price. The price elasticity of supply (PES) is measured by % change in Q.S divided by % change in price. If the price of a cappuccino increases by 10%, and the supply increases by 20%. We say the PES is 2.0. …
Definition – Price discrimination involves charging a different price to different groups of people for the same good. For example – student discounts, off peak fares cheaper than peak fares. Different Types of Price Discrimination 1. First Degree Price Discrimination This involves charging consumers the maximum price that they are willing to pay. There will …