Supply and demand coordinate to determine prices by working together. Supply refers to meeting the demand of something. When a business has a supply of something, they are meeting the demand of what the consumer wants to purchase. Demand is the amount of something and how badly consumers want to purchase something. The demand lets a business know how much to supply.
Based on the percentage change in price and the percentage change in the quantity demanded for newspapers, demand is elastic.
<h3>What is the price elasticity of demand?</h3>
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = percentage change in quantity demanded / percentage change in price
Price elasticity of demand = 8/4 = 2
<h3>What is elastic demand?</h3>
Demand is elastic when the coefficient is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.
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Answer:
The demand for hotel rooms is inelastic
Explanation:
An inelastic demand is the one that is not very sensitive to price changes (the price elasticity of demand is less than one). In this case, even though the RitzminusCarlton hotel cut they rates by $50 per night, they did not see a significant response in occupancy. It is not perfectly inelastic because in that case the RitminusCarlton hotel would not have seen any changes in occupancy (they saw a response in occupancy, but it was not meaningful). In the demand and supply graph, an ineslatic demand curve is steeper than the normal one. The more inelastic the more steeper the curve.
- Shut down, if the minimum possible average variable cost is $5
In the purely competitive market majority of the producers is price taker as there are many sellers of the same homogenous product. When in the situation of Marginal Cost (MC) of product at the current rate of production is equal to the market price. This shows that the firm isn’t in profit, it is selling at which they are producing. So, the Average Variable Cost AVC of product at this level indicates the shutdown of the firm production.
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