Question
1. Define market demand, market supply, and equilibrium. Show
how these concepts can be illustrated on a basic demand/supply
graph.
2. Discuss the differences between the short run equilibrium
and long run equilibrium from the perspective of producers and from
the perspective of consumers. Why do you think it is important for
managers to understand the mechanics of supply and demand in the
short run and in the long run? Give an example of a company whose
business was either helped or hurt by changes in supply or demand
in the markets in which they were competing.
3. For each of the following products, indicate whether you
believe demand will be relatively price elastic or relatively price
inelastic. Give economic reasons for each reply. Remember that high
demand does NOT imply high elasticity. High elasticity occurs if a
change in quantity demanded is relatively large compared to the
associated change in price regardless of how high the quantity
demanded is to begin with.
a. Mayonnaise in general
b. A specific brand of mayonnaise
c. Chevrolet automobiles
d. Tesla automobiles
e. Washing machines
f. Beer
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