Xeco 112 Checkpoint- Appendix B Essay Example
1. What do substitutes refer to in economics? Give an example of two substitutes.
This would be the thing or good that someone or a company might buy to replace another good at a cheaper cost. So for example if a company is using cotton to make parts for their product and the price of cotton goes up the company may look for a substitute of another fabric that works the same at a lower price for time being. Another example might be glass and plastic. A company might use glass bottles to hold their product and the price goes up on glass so they switch to plastic bottles because they are cheaper.
2. Define “Price Elasticity of Demand.” Give an example.
This is the percentage of the quantity of a good or product and the percentage of the change in price for the good or product.
3. Determine if the demand for the following products is price elastic or price inelastic, and explain your answer. In your explanation, be sure to include how the necessity of a good and the availability of substitutes affect the price elasticity of demand in each of these specific cases:
• Gasoline as a commodity
This is inelastic because gasoline cannot be substituted with anything.
• Gasoline sold at a local gasoline station
Elastic because there is more gas stations to compete with. There is more competition.
• Hotel rooms for people planning a vacation
Elastic because people can look around for the best hotel deal.
• Hotel rooms for people on business to meet an important client Inelastic because is the important client only wants to meet at an expensive hotel then they have no choice but to pay the high prices.
4. Define the Law of Demand and the Law of Supply. Give an example for each.
The law of demand is if the demand of something goes up then the supply will go down and vice versa for the law of supply. If more people are demanding orange juice then more of it needs to be made (supply) if this is unable to happen then the price will go up for
This would be the thing or good that someone or a company might buy to replace another good at a cheaper cost. So for example if a company is using cotton to make parts for their product and the price of cotton goes up the company may look for a substitute of another fabric that works the same at a lower price for time being. Another example might be glass and plastic. A company might use glass bottles to hold their product and the price goes up on glass so they switch to plastic bottles because they are cheaper.
2. Define “Price Elasticity of Demand.” Give an example.
This is the percentage of the quantity of a good or product and the percentage of the change in price for the good or product.
3. Determine if the demand for the following products is price elastic or price inelastic, and explain your answer. In your explanation, be sure to include how the necessity of a good and the availability of substitutes affect the price elasticity of demand in each of these specific cases:
• Gasoline as a commodity
This is inelastic because gasoline cannot be substituted with anything.
• Gasoline sold at a local gasoline station
Elastic because there is more gas stations to compete with. There is more competition.
• Hotel rooms for people planning a vacation
Elastic because people can look around for the best hotel deal.
• Hotel rooms for people on business to meet an important client Inelastic because is the important client only wants to meet at an expensive hotel then they have no choice but to pay the high prices.
4. Define the Law of Demand and the Law of Supply. Give an example for each.
The law of demand is if the demand of something goes up then the supply will go down and vice versa for the law of supply. If more people are demanding orange juice then more of it needs to be made (supply) if this is unable to happen then the price will go up for