Case Study Using Demand and Supply Analysis
QUESTION 1
The demand for the apartments around that particular area will be relatively inelastic. When demand is relatively inelastic, a large amount of change in the price will still cause a small amount of change in the quantity. Assume that if there is a large amount of decrease in the price, it will only cause a small amount of increase in the quantity because the demand is relatively inelastic. Thus, the demand curve will be steeper. The factors that will cause the demand to be relatively inelastic are that the people who live in that area be likely to stay in that area because they cannot afford to live in other areas of the city. They prefer to live with people of their ethnic group and there is a discrimination against them in other areas of the city. Although the rents are very high percent of people’s incomes, they will still tend to stay in that particular area. Furthermore, the apartment has become necessity to the people who live in that particular area. Although there is substitute goods in other area of the city but they still tend to stay with their ethnic group because they don’t want to live with different ethnic people. Thus, this caused the demand for apartments on that area to be relatively inelastic. In short-run, the demand tends to be inelastic because currently only that particular area is composed exclusively of apartments and is populated by low-income residents. However, in long-run maybe other area of the city will also have better apartments, same ethnic group, lower rental and other factors therefore the demand will be elastic in the long-run. On QUESTION 3 Figure 1.0 will show the elasticity of demand will be at (D1). Price will be at (P1) and quantity will be at (Q1). Equilibrium will be at point A. The demand curve will be steeper.
QUESTION 2
The price elasticity of supply measures the relative response of a change in quantity supplied to a change in price. More specifically the price
The demand for the apartments around that particular area will be relatively inelastic. When demand is relatively inelastic, a large amount of change in the price will still cause a small amount of change in the quantity. Assume that if there is a large amount of decrease in the price, it will only cause a small amount of increase in the quantity because the demand is relatively inelastic. Thus, the demand curve will be steeper. The factors that will cause the demand to be relatively inelastic are that the people who live in that area be likely to stay in that area because they cannot afford to live in other areas of the city. They prefer to live with people of their ethnic group and there is a discrimination against them in other areas of the city. Although the rents are very high percent of people’s incomes, they will still tend to stay in that particular area. Furthermore, the apartment has become necessity to the people who live in that particular area. Although there is substitute goods in other area of the city but they still tend to stay with their ethnic group because they don’t want to live with different ethnic people. Thus, this caused the demand for apartments on that area to be relatively inelastic. In short-run, the demand tends to be inelastic because currently only that particular area is composed exclusively of apartments and is populated by low-income residents. However, in long-run maybe other area of the city will also have better apartments, same ethnic group, lower rental and other factors therefore the demand will be elastic in the long-run. On QUESTION 3 Figure 1.0 will show the elasticity of demand will be at (D1). Price will be at (P1) and quantity will be at (Q1). Equilibrium will be at point A. The demand curve will be steeper.
QUESTION 2
The price elasticity of supply measures the relative response of a change in quantity supplied to a change in price. More specifically the price