Microeconomics and Market Systems pt 1

Sir Shannon Scott Williams

January 10^th, 2010

ECON220

Unit 2: Discussion Board

Microeconomics and Market Systems

The winter seasons’ temperature for south eastern United States changes more than today’s gasoline prices. One week it could be a steady 32 degrees Fahrenheit and the next week temperatures’ could rise to 45 degrees. With the new job I have, I sometimes have to work outside. Now, this week, the coldest so far for this season, I needed a winter jacket from the local hardware store.

At the time of shopping I noticed several different types of jackets: heavy duty ($150), light duty ($25), stylish ($125), and all-purpose ($50). There were plenty of options to choose from, and since this was a work-jacket, I didn’t need anything too fancy or expensive. Due to the upcoming cold predictions, I know that I absolutely needed a jacket to prepare for, so even if the sales attendants changed the prices on scene, I would still make a purchase. The jacket I chose was the all-purpose ($50).

Changing the prices of a product can affect revenues earnings. To determine this, economist use the price elasticity of demand, which measures the responsiveness of the quantity demanded to changes in prices (Krugan, Wells, 2009, p. 144). The elasticity is based on the availability of substitutes, the specific nature of the good, how much income is spent on the good, and the amount of time consumers have to buy the good. They classify the responsiveness to elastic if the changes in quantity demanded are greater than the changes in prices. Inelastic if changes in quantity demanded are less than the changes in prices. Unitary elastic if changes in quantity demanded equals the changes in prices, (QuickMBA.com, 2009).

Based on those factors, my jacket would be inelastic due to my spending wasn’t very much, the product is a necessity, there were many jackets to choose from, and I had all season long to purchase the jacket. During this current economy, demand wouldn’t change much because of the cold weather conditions and consumers are likely to purchase the good even if prices are changed. In addition, it is logical for businesses to change prices on products when there is a change in demand (eg. winter clothes, spring clothes).

References:

Krugan, Wells. (2009). Economics (2^nd Ed.).

Worth Publishers. AIU Online Version

Price elasticity of demand. (n.d.). Retrieved August 26, 2009, from QuickMBA Web site: http://www.quickmba.com/econ/micro/elas/ped.shtml

Thursday, February 3, 2011 // Labels: market systems, microeconomics // 12 comments //

12 comments to "Microeconomics and Market Systems pt 1"

February 3, 2011 at 7:05 PM
Anonymous says:

Good thing I don't have to spend lots of money on winter clothes since it's pretty hot where I live :D
February 3, 2011 at 8:48 PM
Zakk says:

We've been talking about MC, ATC, and LRATC curves in my microeconomics class D:
February 4, 2011 at 4:51 AM
Jordan says:

good stuff man

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February 4, 2011 at 11:14 AM
Yuri Testikov says:

Being from Canada, I have spent (wasted) a lot of money on winter clothes.

http://gnarlyweather.blogspot.com/
February 4, 2011 at 4:56 PM
Public Confessions says:

@john i bet you have also spent alot on internet too lol
February 5, 2011 at 12:09 AM
Some Guy says:

I respect that you cited your sources: people on the internet seem to feel no obligation to give credit where credit is due.

Anyway, thanks for the read. Economics has always been a topic of interest to me, and I regret not studying it in school. I will definitely be checking in. Keep up the good work!
February 5, 2011 at 2:16 PM
SoreLosersGaming says:

It's always pretty cold and rainy here, so spending on winter clothes isn't a big deal...
February 5, 2011 at 2:29 PM
G says:

Love the economic theory...
February 6, 2011 at 10:47 AM
Inhia says:

All these big words. It interests me, I am reading 'the richest man in Babylon' heard of it? followed, supported
February 10, 2011 at 8:03 PM
The Big Solid says:

i failed micro economics...
April 2, 2011 at 1:58 AM
Budi Murjiyanto says:

Nice Video on Youtube About Adsense on Blogger.

Thanks
May 8, 2012 at 3:27 AM
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