Microeconomics: Part II | Social Studies

November 30, 2015 thetasctest

Microeconomics: Part II | Social Studies

Do you see a pattern of supply and demand, elasticity, or income distribution in the world around you? Are you familiar with what these economic terms mean? Since the study of microeconomics is a high emphasis topic on the TASC Test Assessing Secondary Completion™ Social Studies subtest, let’s refresh our memory of past microeconomic material, and advance our understanding.

Before we begin, review our beginner’s guide to microeconomics.


Now let’s look at key concepts found in this guide and relate them to real-life examples:

  • Supply and demand relates the price and output of individual markets, where supply is the behavior of a seller and demand is the buying behavior of consumers.
    • For example, if avocado farmers have ideal weather to grow their crop, they will end up harvesting a larger number. This increases the supply of avocados. With so many to sell, the price of avocados decreases.

      If farmers experience a draught or flood, they will have fewer crops to harvest, decreasing the supply of avocados and increasing their price.

 

  • Elasticity is the relative responsiveness of a supply or demand curve in relation to price.

There are two ways to view elasticity:

  • Price elastic means the price change caused a greater percent change in the demand of a good.

For example, bread is a staple in many people’s diet. There are numerous brands of bread to choose from. If someone usually buys Brand X Bread, but notices a price increase and is unwilling to pay the new cost, they can easily switch to Brand Y Bread. The demand for bread is elastic since there are many options to choose from.

  • Price inelastic means the price change caused a smaller percent change in the demand of a good.

For example, water is an innate, biological necessity for human survival, with no available alternatives. If the cost of water increases, the demand will still remain high. The demand for water is inelastic since there are no alternatives.

 

  • Income distribution explains how money, or income, is spread out among members of society.
    • For example, how much money you make will determine the type of lifestyle you can afford. The more money you have, the more you’re able to afford. Similarly, the less money you have, the less you’re able to afford.

      Income distribution varies according to population groups and where you live.

 

  • Monopolies are businesses that serve as the only supplier of a specific good or goods in a market.
    • For example, think about the cell phone industry; there are multiple providers in the mobile carrier market. What if Verizon Wireless™ was the only cell phone provider? Verizon would have a monopoly on the mobile carrier market.
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