Utilizing the supply and demand model

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Questions on Elasticity

1. Using the supply and demand model, explain what would happen to the supply curve during a drought. Also explain the affect on the price of water.

2. Name a relatively inexpensive product that you purchase on a regular basis. If the price of that product increased by 25% how would you react? Why is your response elastic or inelastic?

3. Name a relatively expensive product that you purchase less frequently. If the price of that product increased by 25% how would you react? Why is your response considered to be elastic or inelastic?

4. Let's consider the price of gasoline. It has been changing a lot over the course of the last few years. How have you responded to the changes? Explain your reaction to the change in terms of it being either elastic or inelastic.

5. Would you react differently if you believe that increased gas prices will be temporary (short run) as opposed to being a long run phenomenon? How so and why?

 

Reference no: EM1327107

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