Economics homework

1.

Define the term elasticity of supply

Price elasticity of supply measures the change in quantity supplied and a change in price. This can be measured with the formulae percentage change in quantity supplied/percentage change in price. An example of this is if a company decreased its supply from 20 to 10 and they increased their price from 5 to 10 then there would be a change of 10 supply and 5 price which will mean 10/5 which will mean the price elasticity of supply is 2

2.

Using extract A, identify two significant features of the UK house price affordability indicator over the period shown?

From extract A I can see that the house price affordability indicator fell significantly from the years 1989 to 1995. I can see this because from the year 1989 it was 12.5 but through the years it decreased until 1995 to 7.2. From extract A another significant point I can make is that the peak (least affordable) years for house prices was 1984 to 1989. I can see this because from 1984 the indicator was roughly at 12.5 moving through the years to 1989 the indicator was still roughly 12.5.

3.

With the help of an appropriate diagram, explain how two