Which demand is called elastic?

In what units is elasticity of supply shown?

Why is the price elasticity of demand coefficient negative and the corresponding coefficient for supply positive?

What supply is called inelastic?

What is the difference between the inelastic and the perfectly inelastic supply?

Why is agricultural supply usually inelastic?

What is the tendency of agricultural supply development?

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Mixed Economy

There are three types of management in economies. An economy maybe almost totally planned, as it was in the Soviet Union. An economy may be almost totally unplanned, as it is in the USA Or an economy may be a combination of planning and freedom of operat ion. Examples of the latter are Japan and South Korea

In a planned economy the government decides what goods are to be produced and how they are to be marketed. Governments set all the priorities, and the producers are to follow the directions given to them.

In a partially planned economy such as Japan's, the government often encourages industry and helps it with subsidies. Government also makes investments and regulates trade.

The United States is an example of an unplanned economy. But it has a lot of government intervention in economic activity. As the economy of the United States grew, and as government and its importance increased, the government policy at every level acquired greater importance for the economy.

But the economy of the United States may be called unplanned because the government does not regulate what will be produced and how it will be marketed. These decisions are left to the producers. Even the great amount of government regulation that has emerged since the Great Depression has not turned the economy of the United States into a planned economy.

The name of the American economic system is capitalism. Another name for it is the free market economy.

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Technology and Supply

An improvement in technology will increase the supply as producers will want to supply a larger quantity than before at each price. An improvement in cocoa refining makes it possible to produce more chocolate. So do improvements in packaging techniques. Faster transportation and better refrigeration may lead to less spoiled cocoa beans. Each of these technological advances allows firms to supply more.

Technology must be understood very broadly. It includes all know-how about production methods, not only the state of available machinery. In agriculture, the development of disease-resistant seeds is a technological advance. Improved weather forecasting may lead to better timing of planting and harvesting. A technological advance is any idea that allows more output from the same inputs as before.

1. What is included in technology?

2. What is a technological advance?

3. What technological advances may increase the supply of chocolate?

4. What technological advances in agriculture can you name?

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A change in demand takes place when one of the factors assumed constant changes.

An increase in income results in a rise of the quantity demanded, provided the goods are normal.

A change in the price of one good has an income effect and a substitution effect. The income effect of a price increase is to reduce the quantity demanded of all normal goods. For inferior goods, the income effect works in the opposite direction. The substitution effect leads consumers to buy less of the goods whose price has increased.