Step One in the Three-Step Program for Analyzing Changes in Equilibrium

question 182

Multiple Choice

Step one in the Three-Step program for analyzing changes in equilibrium is as follows:

• A)Decide which direction the curve shifts.
• B)Decide whether the event shifts the supply or demand curve.
• C)Use the supply-and-demand diagram to see how the shift changes the equilibrium.
• D)Any of these could be used first.

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Definitions:

Relatively Inelastic

Describes a situation where the demand or supply for a good or service changes only slightly in response to changes in price.

Price Elastic

Refers to a situation where the demand or supply for a product or service significantly changes in response to its price change.

Soft Drinks

Non-alcoholic beverages that are usually carbonated and contain various flavorings and sweeteners.

Price Elasticity

A measure of the responsiveness of the quantity demanded or supplied of a good or service to a change in its price.