Topics in Economics
Forms of Socialism in Government Advantages and Disadvantages of Capitalism What is Capitalism? Characteristics of Capitalism Types of price elasticity of demand Types of elasticity of demand Types of capital market: Primary market and secondary market Capital market explained with its functions Basic tools for economic analysis: Graphs explained with its characteristics and importance Basic tools for economic analysis: Tables explained with its characteristics and importance Factors affecting population in economics Advantages of Inflation Disadvantages of Inflation Concept of Inflation in Economics Scheme of work for Economics, SS1, First Term Scheme of work for Economics, SS1, Second Term Scheme of Work for Economics, SS1, Third Term Functions of the Wholesaler Advantages and Disadvantages of the Wholesaler Wholesale Market: Who is a Wholesaler? Characteristics of the WholesalerAcademic Questions in Economics
_____ is defined as a gradual and sustained rise in price level of goods and services in relation to their availability.
A. Basis Point Rate
B. Hike Rate
C. Elastic Supply
D. Elasticity of Price
E. Price Inflation
F. Aggregate Supply
The wholesalers can bring about an economy of scale.
A. True
B. False
Which of the following statement isn't a characteristics of the wholesaler?
A. They may have to operate in specific areas or regions accorded them by the producer
B. They are often popular in the line of goods they supply
C. They are not risk bearers
D. They have good storage facilities
E. They often pay for goods supplied by the manufacturers in advance
F. They usually have business agents or brokers
The wholesalers act as the middlemen in supply chain.
A. True
B. False
Large retailers who buy directly from manufacturers are termed as _____.
A. Wholesale Retailers
B. Certified Retailers
C. Codified Retailers
D. Commodity Retailers
E. Manufacturers Retailer
F. Conspicuous Retailers
_____ is a market whereby the sellers buy goods in lesser quantities from the wholesalers and sells in bits to the final consumers.
A. Commodity
B. Retail
C. Wholesale
D. Labour
E. Common
F. General
Which of the following is not a financial market?
A. Money Market
B. Bond Market
C. Foreign Exchange Market
D. Virtual Market
E. Capital Market
F. Stock Exchange Market
A _____ market provides a platform whereby job seekers link up with employers in an attempt to be hired.
A. Wholesale market
B. Bond market
C. Physical market
D. Virtual market
E. Factor Market
F. Labor Market
As students, diving into the world of economics can sometimes feel a bit daunting. One key concept that can help you grasp the dynamics of market behavior is elasticity of demand.
Simply put, elasticity of demand measures how much the quantity of consumed goods or required service changes when there’s a change in price or other factors. The elasticity of demand therefore illuminates how consumers behave in the market when price changes, alongside other factors like income.
Please read on the concept of demand here.
From the above introduction, we will consider how price changes, alongside other factors that affect the quantity of demanded goods and services.
These factors affecting the changes in quantity of goods demanded are often classified under the "types of elasticity of demand ". They are explained below:
Imagine this: you and your friends are planning a pizza night. Suddenly, the price of your favorite pizza increases by 20%. Will you still order as much? This is a classic example of price elasticity of demand!
Price elasticity of demand measures how sensitive consumers are to price changes. If the quantity demanded changes significantly in response to a price increase or decrease, we categorize the demand as elastic.
For instance, if that pizza was your go-to cheap option, a price hike might cause you to look for alternatives. Conversely, if the quantity demanded barely changes regardless the price hike, it’s considered inelastic, suggesting that consumers are willing to pay a higher price (for reasons best known to them).
Please read on demand schedule and types of demand here.
Price elasticity of demand can be classified into five types. These are:
Price Elastic Demand
Price Inelastic Demand
Unitary Elastic Demand
Perfectly Elastic Demand
Perfectly Inelastic Demand
Please read detailed explanations on the five types of price elasticity of demand here.
Next up is income elasticity of demand, which examines how changes in consumer income affect demand for a product.
Imagine you just got a dream job and your income increased. You might decide to buy more organic food or upscale tech gadgets. On the contrary, if you had lost your dream job, the reverse may likely happen as you may purchase less organic food and downscale your tech gadgets.
From the above instances, income elasticity of demand can therefore be positive or negative.
If an increase in income leads to an increase in demand; that good or service demanded is consided as normal (and the income demand is said to be positive). For instance, this increased income may result in more purchases of clothes and internet data.
Please read the concept of supply and supply curve here.
However, if an increase in income causes demand to fall, it’s considered an inferior good (and the income demand is considered as negative). For instance, if an increased income leads to a decrease in the purchase of cheap fast foods and alcohol.
Now, let’s talk about cross elasticity of demand, which focuses on how the demand for one good responds to the price change of another good. This is particularly interesting when you consider products or services that are substitutes and complements.
Imagine the price of Coke increases. What happens? Many people might switch to Pepsi, making the demand for Pepsi increase. In this scenario, Coke and Pepsi are substitutes, showcasing positive cross elasticity.
On the flip side, consider bread and butter. If the price of bread increases and you buy less bread, you’ll also likely buy less butter. This reflects negative cross elasticity, indicating that these goods are complements.
You can read on scale of preference and opportunity cost here.
Lastly, it’s essential to understand the two extremes: perfectly elastic and perfectly inelastic demand. Perfectly elastic demand means consumers will only buy at one price. In this regard, any price change leads to zero demand. For instance, imagine some fresh tomatoes in a farmer’s market; if one vendor raises prices, consumers will flock to the next vendor.
On the other hand, perfectly inelastic demand indicates that the quantity of demanded goods or services doesn’t change at all with price shifts. Think of life-saving drugs; no matter how high the price goes, patients will still find a way to purchase them.
You can read on the advantages of inflation here.
In conclusion, understanding the various types of elasticity of demand not only illuminates how consumers behave in the market, but also provides students with invaluable knowledge relevant to everyday decisions and broader economic phenomena.
Next time you’re out shopping or discussing prices with friends, think about the elasticity at play. It isn't just a concept; it’s an insight into how we all navigate the world of buying and selling!
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Amazing facts in Economics
Notable points in Economics
A unitary elasticity of supply is seen when a change in price brings about a corresponding and proportional change in the quantity of goods or services supplied.
The graph below shows a unit elasticity of supply:
Below is an instance of a unitary elasticity of supply:
If a 100% increase in the price of wheat translates into a 100% increase in the production and supply of wheat, then the supply elasticity is said to be unitary elastic and its value is equal to 1.
Unitary elasticity is always equal to 1, that is: Es = 1
The supply curve runs diagonally and will pass through the center.
Supply elasticity is defined as the rate at which an increase in price of goods translates into its increased production and availability in the market. Supply elasticity is also termed as price elasticity of supply.
Consider the statements below:
If a 100% increase in the price of rice translates into a 100% increase in the production and supply of rice, the supply elasticity is said to be unitary elastic and its value is equal to 1.
If a 100% increase in the price of rice translates into a 50% increase in the production and supply (quantity) of rice, the supply elasticity is said to be inelastic and its value will be greater than zero and less than 1. In this case, the exact value is 0.5: (value of change in the quantity of rice divided by value of change in price of rice = 50/100 = 0.5).
The individual demand schedule is a table that shows the demand of a commodity that an individual (consumer) purchased at various prices, and at a particular time.
The table below shows an individual demand schedule:
|
Price in Naira (of a tuber of yam) |
Quantity demanded (per week) |
|
500 |
5 |
|
400 |
10 |
|
300 |
15 |
|
200 |
20 |
|
100 |
25 |
The market demand schedule is also referred to as an aggregate demand schedule, total demand schedule or composite demand schedule.
This is a table that shows the different commodities purchased by all the consumers or customers in the market.
The market demand schedule is the summation of the individual demand schedules, showing the demand of different customers for a commodity at a particular price. It is shown in the table below:
|
Unit price of commodity (Naira) |
Quantity demanded by consumer A (QA) |
Quantity demanded by consumer A (QB) |
Market demand (QA + QB) |
|
50 |
20 |
15 |
35 |
|
40 |
40 |
30 |
70 |
|
30 |
60 |
45 |
105 |
|
20 |
80 |
60 |
140 |
|
10 |
100 |
75 |
175 |
From the above table, notice that when the unit price of the commodity was 50 Naira, consumer A demanded 20 quantities while consumer B demanded 15 quantities.
Below are definitions of demand from the perspective of some notable professors:
The demand for goods is a schedule of the amounts that buyers would be willing to purchase at all possible prices at any one instant of a time.
Professor Mayers
Demand is the various quantities of goods that would be purchased per time period at different prices in a given market.
Professor Hibdon
The demand for anything, at a given price is the amount of it which will be bought per unit of time at the price.
Professor Benham
Generally, demand is defined as the willingness of a person, buyer or consumer to buy a specific quantity of goods or service at a given price and time.
From the above definitions, we can infer that the definition of demand is referenced to three major factors. These are:
Quantity of Goods Demanded
Price
Time