NOTE: This is an example of work that meets the requirements to pass this task.
Task A: Elasticity of demands demonstrates the theory that demands for product changes as the price for the product changes. There are three kinds of demand which are as follows: elastic demand, inelastic demand and unit demand. Elastic demand is when the change in demand for product outweighs the change in price. For example, if a store changes their price on sleds by 5%, the result is a 10% increase in demand. Inelastic demand is when the change in demand for product is less than the change in price. An example is if the store changed the price of sleds by 10% and the demand was only 5%. Unit demand is when the change in demand is the same proportion as the change in price.
Task B: The idea of cross-price elasticity of demand measures changes of demand as price changes on another product. This product can be a substitute product or it can be a complementary product. Complimentary product demand moves in the opposite direction as it relates to the price of compliments. When gas prices rose in the U.S., demand for vehicles with low MPG dropped dramatically. Since vehicles and gasoline are complementary products, demand for cars with low fuel economy fell as gas prices rose. With substitute products, demand for substitute goods will rise if the cost of like-product increases because consumers will substitute one product for a like product.
Task C: The relationship between a consumer’s income and demand for products is referred to as income elasticity of demand. Income trends determine the demand for superior products while demand for inferior products move in the opposite direction. An example of this is during the recession when demand for high dollar, new cars went down and demand for used cars increased. This trend was in line with unemployment figures and the fact that consumers were making less money. As the economy recovers, demand for new cars, or...