Part 1
If the price of smartphones increases, what happens to the demand for smartphone cases?
The law of supply states that:
At market equilibrium:
A PED of 0.5 indicates that demand is:
Which of the following is likely to have the most elastic demand?
What is demand?
The willingness and ability to buy a product at different prices
What is Supply?
The willingness and ability to sell a product at different prices
What is market equilibrium?
The point where demand equals to supply
What is a shortage?
The situation when quantity demanded exceeds quantity supplied
What is a surplus?
The situation when quantity supplied exceeds quantity demanded
A leftward shift of the demand curve for normal goods may be caused by:
Which of the following will shift the supply curve for bicycles to the right?
The price of a good increase. What could cause this?
If demand is perfectly inelastic, the demand curve is:
Which price elasticity of demand (PED) would cause an increase in total revenue if the price of the good increased?
What makes a product inelastic in demand?
Necessary, addictive (使人上瘾的), or without any substitutes.
What makes a product elastic in demand?
Not necessary, or many substitutes
What is revenue?
Revenue is the money a business earns from selling its goods or services. It equals to price multiply by quantity sold.
What is price elasticity of demand?
Responsiveness of quantity demanded to the change in price of a product
What is price elastic demand?
A price change leads to a larger percentage change in quantity demanded.
A store sells computer cases. Last month, the price was $10 per case, and they sold 200 cases. This month, they increased the price to $11 per case, and now they sell 160 cases. Calculate the Price Elasticity of Demand (PED).
PED=2
A new study says that drinking tea is good for your heart. Will more people want to buy tea? What will happen to the price?
More people will want to buy tea → demand increases.
Price will go up because more people are buying tea.
If the price elasticity of demand (PED) is 2, is demand elastic or inelastic? Give a reason for your answer.
Elastic demand because PED is greater than 1.
The price of fuel/petrol (汽油) goes down. Will more people want to buy cars? What will happen to the price of cars?
More people will want to buy cars → demand for cars will increase.
Price of cars will go up because more people want to buy them.
If demand is elastic and the seller wants to increase total revenue, should the seller increase the price or go back to the lower price? Give a reason for your answer.
Lower the price. Reason: When demand is elastic, lowering the price will make the quantity demanded increase by more than the decrease in price, so the seller earns more money (higher revenue)