Price elasticity of demand measures how quantity demanded responds to price changes. If a price decrease does not lead to a corresponding increase in the quantity of cars purchased, the demand is considered price inelastic. This indicates that consumers are not sensitive to price fluctuations for this specific good, potentially due to lack of substitutes or necessity.

Advertising serves multiple functions in a market economy. It is designed to increase brand awareness, inform consumers about product features, and ultimately stimulate demand. By building brand equity and communicating value propositions, firms aim to increase their market share and boost overall sales volume. Therefore, these objectives are complementary components of a comprehensive marketing strategy.

While inelastic demand allows for high tax revenue in the short term, consumers often adjust their habits over time. As consumers find substitutes or quit smoking, the price elasticity of demand increases in the long run. Consequently, the quantity demanded falls more significantly, which can lead to a decline in total tax revenue compared to initial projections.

An inferior good is defined by its income elasticity being negative. This means that as a consumer's income increases, their demand for the good decreases because they switch to higher-quality or more expensive alternatives. Therefore, demand for an inferior good is inversely related to the consumer's income level.

Income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in income. Given an elasticity of +2 and a 20% increase in income, the percentage change in quantity demanded is 2 * 20% = 40%. A 40% increase on 5000 units is 2000 units. Adding this to the original 5000 results in a new total of 7000 units.

Price elasticity of supply measures the responsiveness of the quantity supplied to a change in the price of the good. When supply is price elastic, the coefficient of elasticity is greater than one, indicating that the percentage change in quantity supplied is greater than the percentage change in price. This suggests that producers have the flexibility to adjust their production levels significantly when market prices fluctuate.

A negative price elasticity of demand is a direct consequence of the law of demand, which states that price and quantity demanded are inversely related. This inverse relationship ensures that as the price of a good increases, the quantity demanded decreases, resulting in a downward-sloping demand curve on a standard price-quantity graph.

When both supply and demand increase, the equilibrium quantity must rise. If the supply increase is greater than the demand increase, the downward pressure on price from the supply shift outweighs the upward pressure from the demand shift, resulting in a net decrease in the equilibrium price.

A depressed market occurs when supply overwhelms demand, leading to a persistent decline in prices and economic activity. While 'bearish' refers to a downward trend in sentiment, 'depressed' specifically characterizes the imbalance where excess supply creates stagnation and low market participation.

When a firm has excess capacity, it can easily increase production in response to a price increase without facing immediate constraints on its resources or capital. Because the firm can ramp up output quickly by utilizing idle machinery or labor, the quantity supplied is highly responsive to price changes. This high responsiveness to price fluctuations is the definition of a price elastic supply curve in the short run.