# Paper 4 Question - Economics

A combination of excess supply, weak consumer demand and competition form new channels such as the internet has pushed prices down in shops for goods from clothing to electrical products.

a. Using demand and supply analysis, explain whether the reasons given in the above extract would lead to the stated effect on prices.

b. Discuss whether clothing and electrical products would be likely to have an elastic or inelastic price elasticity of demand.

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I have answered all other parts of the question. Any suggestions?

A combination of excess supply, weak consumer demand and competition form new channels such as the internet has pushed prices down in shops for goods from clothing to electrical products.

a. Using demand and supply analysis, explain whether the reasons given in the above extract would lead to the stated effect on prices.

b. Discuss whether clothing and electrical products would be likely to have an elastic or inelastic price elasticity of demand.

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I have answered all other parts of the question. Any suggestions?

Q1) Just have to draw a simple demand/supply diagram with brief explanation. Due to excess supply, the S (supply line) shift to the right on the diagram(s2). While the weak demand causes the D line (demand) on the diagram to shift to the left(d2). Now there is a new equilibrium s2 + d2 , resulting at a lower price (the x axis is the price line- P2) compared to before p1.

Q2) The PED depends on the added-value placed on the product by the consumer. For eg. Clothing would be elastic to price changes if the consumer could buy the exact piece of clothing else where. Whilst a price increase may not affect the demand for clothing if it, for eg., is a branded. (consumers are willing to pay more because of the mark)

The above is only a very simple explanation and you need to be more detailed--tho hope it helps....xxx
Thanks this really helped me a lot