The supply and demand model gives you a tool to better understand where prices come from and why prices change.Think of a good or service you buy that has seen a recent change in price (here I'm not talking about a one-time sale, or a matter of inflation, but rather a real price change).Then try to analyze the price change using supply and demand logic.Do you think the price change due to a change in market demand, a change in market supply, or both?Explain.Also specify which demand or supply determinant(s) you think caused the change (see the lists of both in chapter 3).

Finally, how did you respond to the price change?Would you describe your demand of this good or service as elastic or inelastic?Thinking of the determinants of the elasticity of demand, what is making your demand more or less elastic?

(tip: be sure to explain the process by which a change in the determinant of supply or of demand leads to a change in price in the market - think market adjustment process and principle of market forces)