Question

Assignment Details

Please use your own experiences and the knowledge you have gained from this week’s readings to answer the following topics and questions. You may also use information that you find in the textbook, AIU’s library or the Internet to support your discussion. Make sure you use economic concepts in your main contribution.  

Think of items that you have purchased in a market:

• Big ticket items like a house, or an apartment rental, or a car;
• Or ordinary items in your weekly budget, like coffee, tea, gasoline, bread, Milk, etc.
  
  You can consider some of the following questions in your contribution.

1. What price trends have you noticed over the last few years? Do the prices fluctuate? Have prices increased or decreased?
2. How would you use what you have learned concerning Supply and Demand to explain these trends?
3. Have there ever been any shortages or surpluses? How would you explain that?

Answer 1

Solution-

Some of the necessity goods like milk, bread have inelastic demand. So changes in their prices would not alter Consumer's demand patterns much. However their prices have not increased much over these years. There is everlasting demand for these items which is matched by the supply of these items.

Houses have steeper supply curve which means that in short period, its supply can be altered much. Prices of houses have increased tremendously over these years. Due to higher prices, demand in the housing market has fallen. People prefer to live in the rented house rather than buying these. There is some sort of surplus of houses in the housing market.

Items like cars come under luxury item. Their demand is highly elastic, which means that a slight change in their prices would alter the demand by a greater extent. Thus, prices of cars have not been changed tremendously over these years.