Assignment Set-I Q1. Price elasticity of demand depends on various factors. Explain each factor with the help of an example. Answer. Elasticity of Demand: Earlier we have discussed the law of demand and its determinants. It tells us only the direction of change in price and quantity demanded. But it does not specify how much more is purchased when price falls or how much less is bought when price rises. In order to understand the quantitative changes or rate of changes in price and demand‚ we have
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among Le Shuttle users * Patterns among peak travelers * Price elasticity of freight traffic Among users of Le Shuttle passenger car service‚ it was noted that the top three important factors in crossing included reliability (70%)‚ value for money (65%)‚ and speed (30%). As reliability is assumed equal between the tunnel and ferries‚ the next biggest factor in customer value is price. By offering even a slightly reduced price than the ferries‚ many customers will switch to using Le Shuttle
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percentage change in the price‚ i.e. when: Percentage change in the quantity demanded > 1 Percentage change in the price Example A fall in the price of cotton in Antigua and Barbuda from $20 to $18 causes the quantity demanded to increase from units to 150 units In the figure above‚ the price range $20 to $18‚ demand is elastic. Percentage change in the quantity demanded = = = 50% Percentage change in the price = = = 10% Elasticity of demand = = 5 Therefore
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of the model. According to this theory‚ modern firms are managed by both the manager and the shareholders. A manager aims to maximize the rate of growth of the firm and the shareholders will try to maximize the dividend and the increase the share price. Sales Maximization Model: This is alternative model for profit maximization model. The model has been propounded by W.J. Baumol who was an
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with a low price elasticity of demand or those with a high price elasticity of demand? Explain. Considering that we are talking about the same product‚ in an industry with many firms‚ where producers and consumers know all quoted prices and where the consumers can identify the product as homogeneous‚ it is fair to say that we are talking about a scenario close to perfect competition‚ thus demand for the product is very elastic. So‚ Ryanair is trying to attract high price elasticity customers.
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burden (incidence) of an indirect tax on the producers & on the consumer varies depending on the price elasticity of demand for the good/product. Indirect Tax is a tax placed upon the selling price of a product‚ so it raises the firm’s cost and shifts the supply curve left or vertically upwards depending on the amount of tax. Because of this shift‚ less products will be supplied at every price. The diagram below shows the effect of imposing a tax and how the tax is being paid. There’re two
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1. A legal maximum on the price at which a good can be sold is called a? price ceiling. 2. Which of the following is likely to have the most price elastic demand? Breakfast cereal‚ corn flakes 3. A reduction in a country ’s barriers to trade? benefits some citizens of the importing country but does not benefit the domestic producers in the importing country. 4. The amount of a good that buyers are willing and able to purchase is quantity demanded. 5. Suppose a market in which demand is more elastic
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into a new market. Price Elasticity of Demand Dairy as an entire market is viewed by most as a necessity for health purposes. Whether it’s fluid milk‚ cultured yogurt‚ or cheese‚ the dairy market is elastic in relation to price. Elasticity in economics is reflective of supply and demand. If we make adaptations to quantity based upon price then the supply is elastic (Hall‚ n.d.). On the demand side‚ demand is elastic if the level of demand is impacted by changes in price. There is competition
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service and due to unforeseen circumstances the demand increases? What happens if the price increases? How does this change affect your goods and or services? The Price of Elasticity of Demand can help determine each of these situations and calculate whether the price should be raised or dropped due to cost and demand of a product. Explanation is key; we will use these examples and explain how Price of Elasticity of Demand is used: If the demand for corn increases due to its use as an alternative
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“Indicator” variables * Male/Female‚ Small/ Medium/ Large * Quantitative/Measurement: the objects being studied are “measured” based on some quantitative trait * The resulting data are a set of numbers * Height‚ Weight‚ Price‚ Unit Sales * Discrete (e.g. # of items in a basket) or Continuous (e.g. weight) WHERE DO WE GET IT? * Primary: collected for the purpose of a specific research project * Survey/focus group * Experimentation * Observation
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