Essays on Elasticities

Abstract

Using the regression equation and given values of independent variables, we estimated the elasticity of each of them and ascertained that the product is highly elastic to price levels and therefore, the firm can consider to decrease the price levels in order to increase their market share. At the same time, cross elasticity and income elasticity were also significant in relation to the demand of the product, although advertisement expenditure has negligible impact on the product’s demand. Hence, own price, price of related goods and income of consumer are three major factors which the firm should incorporate while ...

American Public University

1. Compute the elasticities for each independent variable. Note: Write down all of your calculations. QD = - 5200 - 42P + 20PX + 5.2I + 0.20A + 0.25M and Q = Quantity demanded of 3-pack units P (in cents) = Price of the product = 500 cents per 3-pack unit PX (in cents) = Price of leading competitor’s product = 600 cents per 3-pack unit I (in dollars) = Per capita income of the standard metropolitan statistical area (SMSA) in which the supermarkets are located = $5,500 A (in dollars) = Monthly advertising expenditures = $10,000 M = Number of microwave ovens sold in the SMSA in which the supermarkets ...

American Public University

1. Compute the elasticities for each independent variable. Note: Write down all of your calculations. The demand estimation as follows: QD = -3,500 - 150P + 30A + 75PX + 10Y. When P=300, A=750, PX=200, and Y=10,000. Placing these numbers into equation: QD=-3,500-150(300)+30(750)+75(200)+10(10,000)=QD=-3,500-45,000+22,500+15,000+100,000=89,000. Under given these numbers, we have 89,000 products demanded. Price elasticity of demand is [d(QD)/d(P)]/[QD/P]. Therefore, we take a derivative of the function subject to price, and we assume other variables do not ...

Assignment 1: Demand Estimation

Demand and Supply Estimation Based on the given information, we will calculate the elasticities of different variables. For the first demand function, QD = - 5200 - 42P + 20PX + 5.2I + 0.20A + 0.25M Price of the microwave oven, P = 500, Price of leading competitor’s product, PX = 600 Per capita income, I = 5,500 Monthly advertising expenditure, A = 10,000 Substituting the values of P, M, PX, I and A in the above equation, we will get the value of quantity demanded as, QD= - 5200 – 42(500) + 20(600) + 5.2(5500) + 0.20(10000) + 0.25(5000) = 17,650 units Price Elasticity ( ...

The question of minimum wage introduction for low-skilled workers offers conflicting research findings. Some theorists suggest that the introduction of minimum pay for low-skilled labor may affect the whole employment. However, the general model of competitive market for labor assumes that the introduction of minimum wage will cause job loss among the low-skilled employees. This report is dedicated to the economic analysis of this model.

What Economic Theory Predicts Will Happen

The simplest approach includes the analysis of one separate labor type. In such market, the minimum wage that overshoots the competitive equilibrium in the market causes harm to employment from two standpoints. First of ...

Crude Oil Prices: Market Supply and Market Demand

Abstract The primary purpose of this paper is to understand how supply and demand factors contribute to a consistent decline in crude oil prices across the globe. Furthermore, the paper seeks to understand the impact resulting from the fall in the U.S and the global economy and implications of the same. In the introduction, the paper starts by acknowledging the importance of crude oil to the world economy and the fact that it is an ordinary commodity whose price is influenced by the market forces. Oil prices are renowned for their instability in the market, an aspect that is ...

The effect of minimum wage on employment has been one of the most explored topic in the discipline of labor economics. During the global recession that plagued the world recently, the rate of employment for the low-skilled and young workers (who comprise the largest component of all minimum workers) worsened disproportionately. Traditionally, some economists have argued that the imposition of a minimum wage that is above the market clearing equilibrium wage reduces employment and at the same time contributes to unemployment particularly among the relatively unskilled as well as the young workers. This is quite ironical given that this is ...

Introduction

During the early 1980s, the US auto industry was dominated by three domestic players, Ford, GM, and Chrysler. The import of cars into the US market was relatively less. The market penetration was relatively high in the car market. However, things started changing when the Japanese companies started exporting cars to the US market. In the first half of the 1980s, the market share of Japanese cars in the US market increased manifold. The market share from 17% in 1980 grew to 25% within a few years. Due to the increase in demand for Japanese cars, the demand for the ...

Introduction

During the early 1980s, the US auto industry was dominated by three domestic players, Ford, GM, and Chrysler. The import of cars into the US market was relatively less. The market penetration was relatively high in the car market. However, things started changing when the Japanese companies started exporting cars to the US market. In the first half of the 1980s, the market share of Japanese cars in the US market increased manifold. The market share from 17% in 1980 grew to 25% within a few years. Due to the increase in demand for Japanese cars, the demand for the ...

<Student’s name> <Professor’s name>

In this paper I will check and comment all the steps you did and asked me to review. - I want you to check my Bangladish excel.xlsx and if I did download it correctly from the website.. The steps are all provided on MBA 5303 Midterm Assignment (1).docx Well, I went to that site, did everything like was provided in .docx file and downloaded the file named pwt80.xls. As I may see, it is the same, like yours Bangladish excel.xls. So, I think, you downloaded a correct file. ...

Introduction

Economists most often use elasticity to measure the variation of variables like price, demand and supply of certain categories of products. By managers having the knowledge about the price elasticity of demand for the company’s products and the factors which influence it, this will offer them a great competitive advantage and this will lead to increased profits and market share (Genchev & Yarkov, 2010). Price elasticity of demand is defined as a measure of the rate of response of the quantity demanded due to a change in price. The formula to calculate this is: give as Price elasticity of demand = Proportionate ...

Question 1:

(a) Suppose the income elasticity of demand for furniture is 3 and the income elasticity for doctors' services is 0.3. Compare the impact on furniture and doctors services of a recession that reduced consumer incomes by 10 per cent. (2 marks)

Change in income = 10% = 0.1

Income elasticity of demand = change in quantity demanded/ change in income

Therefore: change in quantity demanded = Income elasticity of demand × change in income

Impact of recession on furniture:

Change in quantity demanded = 3 × 0.1= 0.3 = 30%

A change of 10% in consumer income will result in a 30% change in quantity demanded of furniture.

Impact of ...