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Supply/demand analysis and elasticity of demand

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What kinds of changes in underlying conditions can cause the supply and demand curves to shift? Give examples and explain the direction in which the curves shift.

What is price elasticity? Give examples of five products whose demand is price elastic, and five products whose demand is price inelastic and elaborate on the choices you make.

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Solution Summary

Supply and demand analysis and determinants of elasticity of demand are examined. The kinds of changes in underlying conditions in a curve shift are determined.

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Supply and demand curve shifts in response to changes in the factors that determine supply and demand. Thus, a change in the price of a good would not cause the curves to shift. However, additional workers, more raw materials, or changes in technology will. If it becomes easier to produce a good, the supply curve shifts outward. This indicates sellers' willingness to produce more of the good at lower prices. If there is an increase in the desirability of the good relative to other goods, the demand curve will shift outward. This indicates that buyers are willing to pay ...

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