CROSS ELASTICITY In economics‚ the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good. It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in price of the second good. cross elasticity for substitute products The change in the demand for a product due to the change in the price of the substitute product gives a positive value
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1. Compute the price elasticity of demand between these two points. Let quantity demanded = Q‚ Q1= 400 meals/day‚ and Q2= 450 meals/day Let price = P‚ P1= $20‚ and P2= $18 The change in quantity demanded = Q2-Q1 = 450-400= 50 The change in price = P2-P1= $18-$20= -2 The average in demand = (Q2+Q1)/2= (450+400)/2= 850/2=425 The average in price = (P2+P1)/2 = (18+20)/2 =38/2= 19 The percentage change in quantity demand = change in quantity demanded/the average in quantity demand =50/425 = 0.1174 = 11
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introduction We have studied a host of demand determinants and how supply and demand curves act together to determine market equilibrium‚ and how shifts in these two curves are reflected in prices and quantities consumed and how. The change in these demand determinants brings about a change in the market demand for goods and services. Not all curves are the same‚ however‚ and the steepness or flatness of a curve can greatly alter the affect of a shift on equilibrium. Elasticity refers to the relative responsiveness
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Elasticity Dr. Sushma Shukla Adjunct Assistant Professor Economics North Virginia Community College 1 Elasticity • In economics‚ elasticity is the measurement of how changing one economic variable affects others. For example: i. "If I lower the price of my product‚ how much more will I sell?“ ii. "If I raise the price of one good‚ how will that affect sales of this other good?“ iii. "If we learn that a resource is becoming scarce‚ will people scramble to acquire it?" 2 Price
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There are several examples that come to mind when I think of price elasticity. Included in my list are fuel‚ cigarettes‚ electricity‚ and toilet paper. Price elasticity means that the behaviors of supply and demand are not affected when the price of that particular item rises (changes). Our local power companies experience price elasticity on the energy that we demand‚ when they continually raise prices but the amount of consumer usage is unaffected. In some parts of the country their may
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Income Elasticity of Demand Income elasticity of demand may be defined as the ratio or proportionate change in the quantity demanded of a commodity to a given proportionate change in the income. In short‚ it indicates the extent to which demand changes with a variation in consumer’s income. Practical application of income elasticity of demand 1. Helps in determining the rate of growth of the firm. If the growth rate of the economy and income growth of the people is reasonably forecasted‚ in that
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study its price elasticity of demand and relate it to revenue. Say how the REVENUE of the product increases or decreases because of the ELASTICITY. The elasticity of demand measures the responsiveness of the quantity demanded of a good‚ to change in its price‚ price of other goods and change in consumer’s income. Accordingly elasticity of demand is of three types: Price elasticity of demand Income elasticity of demand Cross elasticity of demand Price elasticity of demand: it is the ratio
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Sessions 4 & 5 Elasticity and Its y Applications Readings Hirschey: Economics for Managers‚ 2009 (Fifth Indian Reprint)‚ South-Western Cengage Learning – Chapter 5 Hubbard & O’Brian: Microeconomics (First Edition)‚ Pearson Education India – Chapter 6 Mansfield‚ Allen‚ Mansfield Allen Doherty and Weigelt: Managerial Economics: Theory‚ Applications and Cases (Fifth Edition)‚ W. W. Norton and Company – Chapter 3 Thomas and Maurice: Managerial Economics: Concepts
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Elasticity Paper ECO/365 August 11‚ 2014 Michael Blakley Elasticity Paper Introduction A consumer walking through the grocery store intent on purchasing the necessary ingredients for a peanut butter and jelly sandwich notices the prices for all brands of peanut butter are higher than expected. Will this consumer choose to not purchase peanut butter and buy bread and jelly only? By raising the price of peanut butter the retailer risks selling less bread and jelly in addition to reduced peanut
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Distribution Strategy of McDonald - March 26th‚ 2011 McDonald’s Corporation is the world’s largest chain of hamburger fast food restaurants‚ serving more than 58 million customers daily. In addition to its signature restaurant chain‚ McDonald’s Corporation held a minority interest in Pret A Manger until 2008‚ was a major investor in the Chipotle Mexican Grill until 2006‚ and owned the restaurant chain Boston Market until 2007. A McDonald’s restaurant is operated by either a franchisee‚ an affiliate
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