Download Week 2 Questionnaire Choose any good form table below that you

Week 2 Questionnaire

Choose any good form table below that you have an experience purchasing. The
chosen good is to be used to answer the 10 questions of the assignment.
Washing machine
Diamonds
College
Computer
Any basic food item
Jeans
T-shirts
Household items
Beverage
Other
Answer the following 10 questions. Use the good your chose from the table
above in your answers.
Question 1
Fill out the table below to list the factors that could cause possible changes in
supply and demand for your chosen good (list at least two factors for supply
and two for demand)
Name of
Good
Diamonds
Supply shifters
Demand shifters
1. Decrease in availability of
supply because of political
changes
2. Increased availability of
less expensive options (e.g.,
zircons) that cause supply to
increase
1. Increased price could
decrease the demand for
diamonds
2. Changes in fashion could
increase or decrease
demand with time
Question 2.
Explain factors that shift supply and demand listed in the Question 1 table.
Supply shifters
There are several factors that may change or shift supply of an item, including the
availability of the merchandise, or the existence of substitutes for the given item.
Demand shifters.
As the supply of the item decreases, the price for the item may increase; this may
ultimately decrease the demand for the item. Furthermore, a celebrity could decry
the use of diamonds from certain parts of the world. This may decrease the demand
for the item.
Question 3
Determine at least two substitutes and two complements for your chosen
product.
Substitutes
1. Simulated gems (zircons)
2. Different precious gems
such as white topaz
Complements
1. The demand for gold
could increase as the price
for diamonds decreases
2. The desire for diamonds
may increase if the cost of
platinum decreases
Question 4
Is your good a necessity or a luxury? Explain. Relate your answer to the
availability of substitutes.
The item I chose is definitely a luxury, especially as substitutes are readily available,
and for a much lower cost.
Question 5.
Define price elasticity of demand. Give both numerical and verbal definitions.
Give an example of how you would calculate price elasticity of demand for the
chosen good.
The Price Elasticity of Demand (commonly known as just price elasticity) measures
the rate of response of quantity demanded due to a price change. The numerical
value is calculated: PEoD = (% Change in Quantity Demanded)/(% Change in Price).
The answer to the second part of this question is interesting in that as a luxury item,
the demand may not necessarily decrease even if the price increases.
Question 6.
Is your demand for your chosen good price elastic or inelastic? How is the
elasticity impacted by the necessity?
Given the answer for the last question, we can see that this item is a luxury. The
price of the item will not likely affect demand for this merchandise. This then makes
he price of the item inelastic.
Question 7.
What is income elasticity of demand? Give both numerical and verbal
definitions.
Income elasticity of demand is a measure of the responsiveness of the quantity
demanded of a good to a change in its price. It is calculated as:
Question 8.
Is your chosen good inferior, luxury, or normal for you? Is income elasticity of
demand for you for your chosen good positive or negative? Mark the correct
answers in the table:
Type of good
Inferior _______________
Normal ______________
Luxury__X_____________
Income elasticity
Positive__________________
Negative__X_______________
Question 9.
How does price elasticity of demand impact revenue? Would the revenue
increase or decrease as a result of change in price? Would the revenue for
your chosen good increase or decrease in response to the increase in price?
Would you spend more or less on your good if price increased (relate that to
the change of the quantity your of the good you’d purchase).
This is another interesting question. There is likely not very much that would
change the revenue that merchants will be able to earn as a result in changes of the
price of diamonds. Think of the newly engaged female; they will not stop wanting a
diamond from their fiancée despite an increase in price. As for me, I love diamonds,
so the amount I purchase will not change even if the cost of diamonds changes over
time.
Question 10.
Consider the following: University of Phoenix decided to increase tuition to
increase revenues. The revenues fell as a result. Does that mean demand for
the courses is price elastic or inelastic? Explain.
A product is inelastic if a large change in price is accompanied by a small amount of
change in demand. Interestingly, the increase in price for tuition likely drove
potential candidates away because of the increased price to go to school there. The
response was that less people wanted to sign up for courses.