94PART TWOSUPPLY AND DEMAND I: HOW MARKETS WORKapplying the most basic tools of economics—supply and demand—to the marketfor wheat.The previous chapter introduced supply and demand. In any competitivemarket, such as the market for wheat, the upward-sloping supply curve representsthe behavior of sellers, and the downward-sloping demand curve represents thebehavior of buyers. The price of the good adjusts to bring the quantity suppliedand quantity demanded of the good into balance. To apply this basic analysis tounderstand the impact of the agronomists’ discovery, we must first develop onemore tool: the concept of elasticity.Elasticity, a measure of how much buyers andsellers respond to changes in market conditions, allows us to analyze supply anddemand with greater precision.THE ELASTICITY OF DEMANDWhen we discussed the determinants of demand in Chapter 4, we noted that buy-ers usually demand more of a good when its price is lower, when their incomes are
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