Elasticity: The real stretch play. We have all heard the phrase‚ “Stretch your dollar”‚ but have you ever stopped to consider what all goes on behind the scenes in order to make this stretch occur? What rules of economics and finance play into making your hard-earned dollar stretch to its maximum value? While the topic of stretching your money spans across all areas of business‚ finance‚ and economics‚ I will focus on the fundamental principle of economic stretch; elasticity. Elasticity in economics
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determine price is demand. Demand is related to consumption. It represents the process through which a consumer obtains goods and services he wants to consume. The demand for any commodity mainly depends on the price of that commodity. The other determinants include price of related commodities‚ the income of consumers‚ tastes and preferences of consumers‚ and the wealth of consumers. Hence he demand function can be written as Dx = F [Px‚ PS‚ Y‚ T‚ W] Where DX represents demand
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Discuss the factors causing a shift in the demand and supply of a specific commodity. In economics‚ Demand refers to the quantity of a goods or services that consumers are willing and able to buy at a given price in a given time period. The law of demand stipulates that there is an inverse relationship between the price of a good and the quantity demanded‚ that is to say‚ if the price of‚ say‚ good X rises‚ it will decrease the quantity demanded of good X and the price of the good falls‚ this
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Chapter 4 Individual and Market Demand Teaching Notes Chapter 4 builds on the consumer choice model presented in Chapter 3. Students find this material very abstract and “unrealistic‚” so it is important to convince them that there are good reasons for studying how consumers make purchasing decisions in some detail. Most importantly‚ we gain a deeper understanding of what lies behind demand curves and why‚ for example‚ demand curves almost always slope downward. The utility maximizing
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Econ 31514 Shenika De Silva SS/2009/087 Content 1. Introduction 2. Production 3. Stages of Production 4. Production Function 5. Production Time Periods 6. Marginal productivity Theory i. Diminishing Marginal Productivity ii. Example 1 iii. Example 2 7. References Introduction Diminishing returns‚ also called law of diminishing returns or principle of diminishing marginal productivity‚ economic law stating
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Industrial Economics Term Paper First Draft A manager has to make demand analysis‚ anticipate time value of money‚ detemine supply and demand levels‚ create a goal for his/her firm and understand the importance of profits‚ use his/her company’s products’ elsaticity tendencies before produce them in large quantities‚ maximize it’s profits and minimize production costs. A firm can be merge with another one because of profit maximization target and minimizing it’s cost. Experiences are also important
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change and how it affects the decision taking. * How demand decisions in response to price changes vary for different types of goods? * Factors influencing the elasticity of demand INTRODUCTION Governments‚ business firms‚ supermarkets‚ consumers‚ and law courts need a way to measure how responsive demand is to price changes—for example‚ will a 10 percent cut in the price of commodity X increase quantity of X demanded a little or a lot? Economists measure the responsiveness of quantity demanded
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two goods are perfect substitutes for each other. 5pennies are equivalent to a nickel. (2) You and I are in consumer equilibrium. CDs cost 10 dollars each and cassette tapes only 2 dollars each. I consume CDs and cassettes. You consume only cassettes. What can you infer about my MRS (marginal rate of substitution) of CDs and tapes? What about your MRS. Since both individuals are in consumer equilibrium‚ for you‚ the MRS should equal the price ratio since you consume both goods. Hence MRS = 10/2 =
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to those involved in economics activities which are everyone: individuals/households‚ firms/businesses and government when it comes to making these choices. It helps us when making such choices‚ from the businesses trying to make a profit to the consumers seeking to get more for less and the government trying to obtain welfare for its citizens. Economics helps us when making decisions about the allocation of such scarce resources so as to best satisfy the needs and wants of individual within an
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190 IEEE TRANSACTIONS ON ENGINEERING MANAGEMENT‚ VOL. 46‚ NO. 2‚ MAY 1999 Price Elasticity and the Growth of Computer Spending Kar Yan Tam and Kai Lung Hui Abstract—Recent works have indicated that the price of computers is a key factor in explaining the growth of computer spending. However‚ it remains unclear whether the price elasticity of the demand for computers is constant over time. Findings on the pattern of price elasticity will have important implications in the study of information
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