Essays on Price Elasticity

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 ...

Introduction

For understanding how the corn industry and the industry of water, I have interviewed with the marketing professionals from these two industries. Considering that marketing departments monitor the demand conditions, they can give us adequate information about their market.

Interviewer: What type of industry are you operating in? Marketing Professional 1: Producing corn requires using large lands, machinery, and knowledge of cultivating corn. Therefore, a company needs to have a high amount of financial resources to enter this market. Also, producing corn requires having the scientific knowledge for agricultural production. Changing climate and worse environmental conditions force us to ...

Reducing class size enhances the student achievement.

Lesser the class size, more productive will be teaching methodology and more efficient will be the learning experience. For instance, a class of 100 students is being taught an econometric lesson involving complex data analysis will have a comparatively less productivity than the same class with a batch of 50 students. Important to note, because every class has a limited time period, within the one with less class size, students can learn and ask more about their queries compared to a class size with large student size. Hence, as the student learns efficiently about the subject, he is able ...

Demand function (QD) = -5200 - 42P + 20PX + 5.2I + 0.2A + 0.25M Where; P= 500, PX=600, I=$5,500, A=$10,000 and M=5,000

Replace values in the equation;

QD = -5200 - 42(500) + 20(600) + 5.2(5,500) + 0.2(10,000) + 0.25(5,000) = -5200 – 21,000 + 12,000 + 28,600 + 2,000 + 1,250 = 17,650 Price elasticity of demand = ∂QD∂P×PQD ∂QD = change in quantity demanded, ∂P = change in price; P= price, QD = quantity demanded ∂QD∂P = -42 QD= 17,650 P= 500 Price elasticity of demand = -42 ×50017,650 = -1.1898 The above elasticity indicates that the product’s quantity demanded ...

Determination and interpretation of elasticities

Demand function, QD = -3,500 – 150P + 30A + 75PX + 10 Y P = 300 cents, A = $750, PX = 200 cents and Y = $10,000 QD = -3,500 – (150 × 300) + (30 × 750) + (75 × 200) + (10 × 10,000) = -3,500 – 45,000 + 22,500 + 15,000 + 100,000 = 89,000 units

Price elasticity of demand

Price elasticity of demand = ∂QD∂P × PQD

Change in quantity demanded/change in price, ∂QD∂P is the coefficient of price, P in the demand equation.

∂QD∂P = -150 QD = 89,000 P = 300 cents PED = -150 × 30089,000 = -0.5056 The above price elasticity of demand indicates that the quantity demanded of the low-calorie, microwavable food decreases by 0.5056% for every increase in price by one cent. The elasticity is less ...

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 ...

Introduction:

The main purpose of writing this report is to determine the marketing metrics and marketing effectiveness of Apple. Marketing metrics are the performance indicators, which permits the business to perform overall marketing performance. The marketing metrics help to attain greater accuracy in the business activities. Marketing plays an active role in the business and the success lies in the marketing abilities. The marketing metrics are categorized into various types’ namely behavioral, financial, physical availability and consumer profile etc. In this report, these metrics with respect to Apple Inc. will be discussed. As a marketing consultant, I will provide the ...

Application of elasticity in Starbucks Corporation

Introduction The concept of elasticity has great application in the decision-making process of a firm. Both production and pricing strategies must consider the level of elasticity of demand for various products. The market behavior of various products can be predicted by determining their elasticity with respect to price and income (Dobson & Palfreman, 1999). The price elasticity of demand helps in the measurement of the extent to which the quantity demanded responds to price changes while the income elasticity indicates how the quantity demanded varies households’ incomes (Opeyemi, 2013). Therefore, price elasticity helps in the pricing decisions while income elasticity ...

Question 1:

Suppose you are given the following: At output level of 6, what will be the marginal cost? Less than 2 Exactly equal to 2 More than 2 Given information is not enough to find out marginal cost Why is this? Question 2: What explains the U-shape of the AC curves in the short and the long run? Shapes of both, short and long run AC curves, are explained by the law of diminishing returns Law of diminishing returns explains the long run AC curve while economies and diseconomies of scale explain the short run AC curve Law of diminishing ...

Current market conditions competitive analysis

Estee Lauder Cos.Inc Estee Lauder Cos. Inc is an American based company that manufactures and markets prestige skincare, fragrance, hair products, and makeup. The company has owned various investments of labels that are internationally distributed to give it a global reach. It establishes departmental stores in various regions. Estee Lauder Cos. Inc has achieved a global leadership in by delighting its consumers with a variety of transformative products, high consumer experiences, and improved capacity to inspire its consumers to express their beauty with its prestigious products. The company is focused solely on its specific beauty products with more than ...

Government Actions in Markets

Figure 1 As a result of increasing the passenger movement tax on airlines, the equilibrium price P2 moves to new point P1. (P1>P2) The new quantity of flights is Q1. Therefore demand decreases, Q1 <Q2. Because of the increased prices some consumers denies to purchase tickets choosing other flight companies or using alternative ways of transportation. A tax that is imposed on sellers in fact creates a burden on consumers as well because of the fact that consumers will be forced to pay higher prices. It is clearly shows on the Figure1 that the revenue from sellers ...

ASSIGNMENT ANSWERS

Question 1 Price Elasticity of demand (PED) can be defined as the measure of the relationship that occurs between the difference of the quantity which is demanded for one good and the difference in its price. It helps to discover to what extant good is sensitive to changes of the price (Cordes, Ebel, Gravelle 2005). The formula for PED = % Change in Quantity demanded / % Change in the Price. A product is sad to be price elastic or responsive to price changes when a small change in price causes a more than proportionate change in the demand of the product. ...

On August 30, 2016, Laura Dimon and Ginger Adams Otis wrote an article for The Daily News under the headline “Protesters gather in NYC to show outrage of skyrocketing EpiPen prices.” The article highlights a controversy that is ongoing as this is typed – the price of potentially life-saving EpiPens has increased fivefold in the decade since Mylan Pharmaceuticals acquired the product. One of the clear economic concepts that the EpiPen controversy demonstrates is elasticity of demand. As Guo (2012) points out discussing price elasticity of demand, the concept is simple. It is intuitive as well. When prices go up ...

ECONOMICS

Absolute and comparative advantages. England has absolute advantages in producing scones (50 > 4), Scotland has absolute advantages in sweaters production (2 > 1). As for comparative advantages, England should be focused on scones production as well (alternative costs for 50 scones is only 1 sweater); Scotland has comparative advantages in sweaters production (alternative costs for 1 sweater is only 20 scones). So, for both absolute and comparative advantages, England should produce scones, Scotland – sweaters. If England and Scotland decide to trade, Scotland will trade sweaters to England. It could be explained by theory of absolute and comparative advantages ( ...

Guo (2012) gives the explanation for the concept of price elasticity of demand. It is simple and, when you think of it, obvious. With a very few exceptions, price increases will drive demand down. Interestingly enough, the controversy over EpiPens in the news today provides a good example of price elasticity of demand. The classic example is a drug addict or the slightly less addicted cigarette smoker. Price was essentially irrelevant to demand to these groups of consumers. The converse condition is also, then, true. Products that are commodities are essentially perfectly price elastic. Gas wars, for example, are ...

First Assignment: Week 5

There are four main types of research, which are Primary Research Secondary Research Qualitative Research Quantitative Research Primary Research In primary research, the data is collected via any method other than secondary research for the first time. The primary data is, however, from a researcher for a particular purpose at hand. Primary research is easily applicable and also easily usable, if done properly; it is up-to-date, reliable and accurate. But, as a matter of fact it is expensive, not immediately available, and is also not readily and easily accessible. Secondary Research In secondary research, the data is collected from ...

Elasticity is a measure of the sensitivity of supply and demand to changes in factors that define them, primarily to a change in the value of the goods. (Mankiw, 2009) In quantitative terms, the elasticity means the degree or measure the response in one variable to the result of a one percent change in another variable value. The most important role in the elasticity of supply and demand plays a varying demand that depends on the prices.

The main factors influencing price elasticity of demand are:

Availability of high-quality interchangeable goods and the price level on them (the more substitutes and the lower the prices are, the more ...

Introduction

Can colleges and universities increase their tuition rates continuously, despite the suffering they cause students? This issue can be and has been tackled by economics – specifically; we can use the tools offered by the study of price elasticity of demand to see what colleges take into consideration before raising their prices. The reaction of students to the increasing tuitions and other expenses might be a driving force on the demand side for higher education. If the students believe that higher education’s high costs will not create a value equal to or less than its cost, they might prefer ...

The habit of tobacco use has been proven to be a leading cause of premature deaths in the United States. Additionally, factors associated with exposures related to environmental tobacco smoke (ETS) have been the leading causes of increasing mortality and morbidity levels in the country and at the global scale. To this effect, therefore, there is the need for having in place policy issues that will effectively address tobacco use amongst children and adolescents, reduce the smoking rates amongst adults and finally prevent non-smokers from being exposed to ETS (World Health Organization, 2013). As it has been established, most ...

Price discrimination refers to a business practice which involves selling of similar or near similar products to consumers at different prices during a certain period (Stole and Lars 2221). There are two main motives why businesses engage in the practice. Firstly, the business may be aiming at becoming a monopoly in the said market segment. In this case, the business could sell certain highly priced goods at a low price to a certain market segment that the business wishes to control. The second and the main reason why businesses engage in price discrimination is to take advantage of consumer ...

Overview

The company upon which this market analysis is based is Estee Lauder Cosmetics INC. The history of Estee Lauder Cosmetics INC. can be traced back to 1946 when the company began operations. The founder of the cosmetics company was Estee Lauder. The premise upon which the company was founded was that there is an inherent beauty in every woman. The company has added more products its product line as a mark of its continued growth over the many decades the company has been in operation (Estee Lauder Cosmetics INC., 2016). Over the seven decades in which the company has ...

The safety shoe brands make their decision on how to produce comparatively less costly, and they make a decision of moving their production to the other countries. The main reason for this decision is the relatively cheaper labor costs in some developing countries like China. Subsequently, the safety shoe companies are transformed into trading businesses in their countries. Outsourcing the production of the shoes will influence the following agents in the economy: 1-Workers who were working in the shoe production factory in the countries of origin, 2-The other workers, 3-The demanders of the safety shoes, 4-The safety shoes companies' ...

Introduction

Can colleges and universities increase their tuition rates continuously, despite the suffering they cause students? This issue can be and has been tackled by economics – specifically, we can use the tools offered by the study of price elasticity of demand to see what colleges take into consideration before raising their prices.

Let us assume that, in an attempt to raise more revenue, New York State University increases its tuition rates. Will this necessarily result in more income for the university? Not always. As we know, revenue depends on price and quantity of the demanded good or service. In the ...

What is a cartel? (5 marks)

The companies in a market might collude to set the prices by making explicit or implicit agreements between them on the market price, sharing the market geographically, or controlling the quantity supplied in the market. The agreement between the companies in a specific market might create an oligopoly behaving like a monopoly. The companies might set the price, and all the agreement partners might obey the agreement. If the companies can create a large market power, they might behave like one monopolist. Cartel is the situation of existence of an explicit or implicit agreement between the companies in a ...

Suppose that, in an attempt to raise more revenue, Nobody State University increases its tuition. Will this necessarily result in more revenue? Not necessarily. As we know, revenue depends on price and quantity of a given good or service; in the case of Nobody State, Revenue = Tuition Price x Number of Enrolled Students If tuition price increases, the number of students will likely fall as fewer students will be able to afford Nobody State and will favor its nearby competitor, Anybody Community College. As we can see, the qualitative aspect of demand is easy to grasp (increase prices, lower ...

In Economics, it is common to outline general principles that may be used for explanation of development of economy from local to global level as well as behaviour of different stakeholders like private companies, governments, consumers, etc. These principles are usually categorized in three groups: how people make decisions, how people interact with each other and forces/trends that influence the economy. In this paper, they will be briefly presented in order to understand better how companies should act in order to be competitive and responsive to the market changes. How people make decisions. In the free market economy with ...

Market Structure

In simple terms, market structure refers to the classification of the various types of markets, based on their unique features on how they allocate prices of a given product in the market. The aspect is primarily classified into two, which include perfect and imperfect market.

Oligopoly

Refers to a type of market structure where there are few sellers in a given economy with many buyers for the commodity. With oligopoly, the sellers have an influence on the commodity price in the market and can significantly affect competition. An example of a company to indicate the above case is the mobile ...

For this paper, the commodity selected for analysis is tea. The paper will examine the team market on a worldwide basis in terms of supply, demand, price history, market structure, and other relevant economic aspects relating to the commodity. According to World Atlas (1), tea is the second most popular beverage in the world. This implies that there is a huge supply and demand for tea globally. Globally, tea is a major import and export commodity. In most markets such as Kenya, India, and Sri-Lanka, sellers sell their commodity through tea auctions and exchanges. Sellers and buyers organize these ...

Price elasticity is one of the three necessary requirements for price discrimination to be possible. If difference in price elasticity does not exist for different customer segment, a firm cannot engage in price discrimination. Differing levels of price elasticity allows a company to offer different prices for the same product to different customers, knowing fully well that the demand for price inelastic customers would not decline much while the demand through price elastic customers would increase by a much higher margin. The first example illustrates the large increase in profits of an airline which has 50% each, price inelastic ...

Identify two microeconomics and two macroeconomics principles or concepts from the simulation/ video. Explain why you have categorized these selected principles or concepts as microeconomics or macroeconomics. The main concepts displayed in the video are the law of supply and law of demand. These concepts are common to microeconomics and macroeconomics. Law of supply is a positive relationship between quantity of goods and services and its price. When price of a good rises, the quantity supplied of the good increases accordingly. With much higher price producers are willing to supply more goods and services. Law of demand depicts negative ...

Abstract

Wesco International Inc, which is an American publicly traded company currently, operating in the U.S. The company supplies electrical and repair products and is based in Pittsburgh, Pennsylvania. Most of the company’s business is conducted in the United States. This article provides a microeconomic analysis by reviewing the current demand and supply situation of the company as well as the involved costs of production and recommended strategies that the company could adopt to gain a competitive power.

Introduction

Maintaining successful operations is a hard task for multinational corporations especially in the current market trends and fluctuating customer demands. However, ...

Changes in Market Equilibrium

The interaction of the forces of demand and supply determines the equilibrium price and quantity in a perfectly competitive market. A market is in equilibrium when no buyer or seller has any incentive to the change in the commodity that he or she buys or sells at the given price. The equilibrium price of a commodity is the price at which the quantity demand of a commodity equals the quantity supply and the market clears. The process by which the equilibrium is reached is shown by the intersection of the demand and supply curve of the commodity.

Summary of the Video

The video " ...

Introduction

Over the last one year, the global oil price has declined rapidly by approximately 50 percent. The drop in the oil prices may have largely been as a result reduced global growth prospects. Analysts argue that the rise of the U.S dollar in relation to other currencies played a significant role in the oil prices decline (Energy Information Administration, 2014). The decrease in the global oil prices has led to a significant impact on the U.S economy. In essence, the price drop has reduced the cost of living while increasing the real consumers’ incomes. The real income gain has ...

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 ( ...

Impact of Minimum Wage on Labor Markets

Minimum wage is the price floor imposed in the labor market to ensure that firms don’t exploit workers. Usually, the minimum wage is set above the equilibrium wage. The minimum wage ensures workers get adequate income that can enable them to live a decent lifestyle. This price floor is revised from time to time as per changes in the cost of living. Therefore, it disrupts the supply and demand of labor in the economy. Economists who advocate for this policy argue that it supports the low-skilled workers who are easily exploited due to their low bargaining power (David, ...

The American Civil War led to the reduction of government revenue and large debts amassed from the financing of war operations. One strategy that the government implemented was using taxes to raise the funds from the public. This approach led to certain products being taxed, for this reason, one of them being tobacco. However, with time, these taxes were effectively recalled with the exception of cigarette taxes, which have remained to the present time. Tobacco has been identified as one of the oldest crops in the U.S and has also been cited as one of the most successful enterprises, ...

1. Critically evaluate the following suggestion: “If the price elasticity of demand for food is low, therefore if you own a restaurant, you can charge higher price to increase revenue”.

Consumers’ sensitivity to price is known as the price elasticity of demand. Simply put, it measures the degree of responsiveness of consumers to a given change in price. A good with an elastic demand will have a value greater than 1 and will experience that people are very sensitive to a given change in price. Products with an inelastic demand will find that even if price increases by a small amount, the quantity ...

Introduction

The objective of any firm is to maximise profits and increase shareholders’ wealth. This objective can only be attained if the market structure is favourable for the operations of the firm. The market for low-calorie microwavable food has changed from perfect to imperfect competition. This paper discusses the effectiveness of the new market structure to the operations of the company. It also assesses the profitability of the firm based on the cost functions and the demand function from assignment. In addition, the paper explores was in which the company can improve its profitability as well as the circumstances under ...

Introduction

Goods can be categorized into public and private goods. Ideally, these two kinds of goods differ in their market structure and characteristics. First, public goods are referred to as goods that have both non-rivalries and non excludable nature. That is; they cannot be separated from the users. On the other side, private goods are defined as items that yield affirmative benefits towards people. They are characterized by the excludable and rivalry nature.

Public goods

Police department The police department is responsible for providing public services of ensuring security within the society. This means that every member, regardless of the social ...

Introduction

For a long time museums have played important storage and access to a people’s artistic, scientific, social and political heritage. As time progresses our museums are becoming even more relevant and sought after than ever. Enabling the access of these important cultural resources to everyone would have enormous benefits in encouraging an active citizenship. Free-admission entry has been a focus of debates in several states throughout Europe and is even effective in a number of states, with the United Kingdom setting the pace. This report reviews the practicability and the impact of the policy by analyzing examples of projects that have been ...

According to Shaun and Gottret (2004), the residual curve refers to the individual demand curve of a firm that is the part of the market demand which is not provided by other competing firms in the market. It can, therefore, be defined as the market demand function after it has been subtracted from the quantity supplied by other competing firms at each price. Suppose the market demand is D (p) and the supply provided by the other firms is S o (p), then there are several ways to calculate the demand for the firm. The first one is by expressing the relationship ...

The Law of Supply

The law of supply states that with an increase in the price of goods, the quantity supplied will increase and as the prices reduce, the quantity supplied will reduce, ceteris paribus. The implication here is that the price of a commodity, and the quantity that is supplied are directly related. Here, the quantity of goods that is supplied refer to some units that the buyers are willing and able to buy. This law rests on the assumption that all the other factors, save for the price of the commodity, which affect the supply of the goods remain the same. The ...

Abstract

The paper dwells on general equilibrium theory by putting into perspective various critical issues. The origin of the concept of general equilibrium theory is illuminated dating back to neoclassical period. Moreover, various models such as Walras model of pricing and modern equilibrium model is also put into consideration. Finally, the importance and application of general equilibrium has also been discussed at length. General equilibrium theory refers to a concept modeled around theoretical economics. The modern general equilibrium takes into consideration three important interpretations which should be taken into consideration. The idea of general equilibrium theory cannot be complete when there ...

INTRODUCTION

In order to come up with effective and efficient strategies, it is important to understand the dynamics of different market structures. Different market structures have different characteristics and features and operate differently. In this report, an attempt has been made to understand the different market structures and comments have been made on the different features and characteristics of these market structures.

MARKET STRUCTURE

A market is a group of individuals, firms and economic agents, who have interaction with each other as a buyer and seller. In economics market structures are defined into four main types, and that are perfect competition, monopolistic competition, monopoly, ...

The prime mantra of this paper is to exploit both the concept of cost and revenue models on the given companies whose nature of business are identical. There are two hypothetical based companies that have been selected for the execution of the same analysis. The underline companies are denoted by Company X and Company Y. They both have dissimilar pricing policies with one another. The entire assignment is divided into different headings that are mainly based on the Introduction, Analytical Framework, and the Conclusion.

Analytical Framework

Brand Y “lit” pricing/sales history There are a number of tools and models that have a ...

Introduction

Our supermarket chain sells “regular” and “lite” variety of two brands of soda X and Y. At any given time and at any store, each brand of soda can potentially have either no promotion whatsoever or a “price promotion” and/or an “in-store promotion”. We are to prepare a business report on our product’s current pricing structure and proposed pricing mechanism aimed at increasing profitability of your product line.

Discussion

In the pivot table, we can infer that when the Lite brand of X used in-store promotion, the Lite brand of Y chose not to have the in store promotion (83% compared ...

Introduction

Economics is a field which has its active recognition n almost every walk of life and it is an important thing as well . Alfred Marsha and Adam Smith are known as the founder of Economics who invented it. According to both of these individuals, Economics is the name of how to earn the money and how to consume it in a perfect and well organized position. There are two different branches of economics, which are microeconomics and macroeconomics. Microeconomics is the branch of economics that deal specifically with the economics of individuals while macroeconomics is the name of economics that ...

Price Elasticity of demand of Marlboro

The price elasticity of demand represents change in the quantity demanded as a result of 1% change in the price (Sivagnanam, and Srinivasan). The price elasticity of demand of Marlboro Cigarettes in the United Kingdom is analyzed from 2009-2014.

Price of Marlboro Cigarette in UK from 2009-2014

(Source: Tobacco Manufacturer Association) The table shows the retail price of a typical cigarette pack with 20 cigarettes and the tax imposed on each pack every year that increased price. The magnitude of change is, -0.40% from 2009-2014. In the United Kingdom, the price elasticity of demand of cigarettes ranges from -0.25 to -0.50 (Jamison, Breman, and et al.). The ...

This paper analyzes the effects of certain events on the price and quantity of milk, considering that other factors are constant and equal. The analysis includes information about changes in quantity supplied and quantity demanded, and shifts in the demand curve and the supple curve. Analyzed events appear as subheadings throughout the paper. - A scientific study shows that consumption of milk is beneficial for healthy bones First of all, let us analyze the effect that this event would have on the quantity demanded of milk on the market. According the law of demand, quantity demanded of a ...

Introduction

Airline companies charge different prices for different classes of passengers. A passenger who wishes to have higher quality services during the flight must pay a higher price for their tickets than those who travel in a different class. The airlines differentiate the prices of customers by having different features in the categories. However, there are other instances when the customers’ ability to travel in the business class is limited by their level of income. Pricing is one of the strategies used in maximizing revenues for the airline companies. The companies, therefore, must take into account the factors that affect demand for ...

Increasing Taxes on Cigarettes:

Increasing Taxes on Cigarettes In this paperwork, I am going to respond to the following question- will increasing taxes on cigarettes reduce smoking in the U.S. Through a literature review, it is depicted that an increase in taxes on cigarettes will definitely reduce smoking in the U.S. Smoking occurrence is claimed to reduce from 20% in 2004 to 15% in 2025. It is important to note that the cost of a packet of cigarette will have to go up, as a result of the implementation of this policy-increasing tax on cigarettes. Low income smokers, especially the teenagers, will not be ...

Part 1 (Using the Midpoint Method)

- Price Elasticity of Demand = (Q2-Q1) ÷ (P2-P1) (Q2+Q1)/2 (P2+P1)/2 = (400-500) ÷ (1.5-1) (400+500)/2 (1.5+1)/2 = 22.22% ÷ 40% = 0.56 - The demand for oranges is price elastic. An increase in the price of oranges leads to a decrease in the quantity demanded. The demand for a product is said to be elastic when an increase in the price of the product causes a decrease in the quantity demanded. - Total Revenue = Quantity x Price TR before price change = 500 x 1 = $500 TR after price change = 400 ...

Difference between Nominal & Real GDP:

Nominal GDP is that when the values haven’t been adjusted for inflation. Real GDP: Real Values are the ones which are adjusted for inflation..

GDP an accurate or inaccurate reflection of productivity:

GDP doesn’t truly reflect a country’s productivity because: - In developing countries especially and some of the developed countries GDP is underreported, due to the existence of black markets that is illegal sale and purchase of goods and services. - In Rural areas, a high proportion of income is generated for self-consumption that is for, e.g., the farmers if produce agricultural products they would consume most of it themselves, and their ...

[Author]

Executive summary

In understanding cost and pricing dynamics in relation to profitability, at least four issues face the cost accountant in tracing product or service costs, the value of which will be used as an essential input in pricing decisions. These are complexity, accuracy, ease of estimation, and time. Joint cost allocation is an example of a complex cost tracing due to inevitable data gaps. Sunk costs exemplify a type of cost the accountants normally consider as marginal and, therefore, may be ignored in the cost trace. Opportunity costs also possess a unique characteristic in its “potentiality” by nature, although quantifiable based on ...

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

Price elasticity of demand is applied in determining pricing decisions. The nature and value of price elasticity determine a firm's profit maximising strategy; increasing or reducing price. The nature of particular markets makes principal-agent problem an inherent feature and companies must design appropriate measures to deal with the problem. Markets can be categorised into four depending on the number of firms, behaviour of the firms, among other factors. This paper explains the concept of price elasticity of demand, principal-agent problem and market structures. In addition, it explores how these features are reflected in the market for natural gas in Arizona. ...

Answer 1: Price Elasticity of demand is the responsiveness or sensitivity of demand for a particular commodity ascribed by a change in the price of such a commodity. It is a quantitative relationship between quantity demanded and price while the other factors are constant. If the elasticity has a higher numerical value, the effect of price change is greater on the quantity demanded. Some of the factors that affect the price elasticity or elasticity of demand are - Nature of commodity: commodities like food grains and vegetables that are necessities have an inelastic demand as they are required for human survival. A luxury ...

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 ...

Part I

- B (Sum of all costs except the lost salary, lost interest) = $30,000+$500+$6000+1200+$1300 - E (implicit costs are indirect payments that includes tips) - B (Total Utility2-Total Utility1- 50-30) - C (Sum the total utility from consuming the bundle = 180+50+40 = 270 utils. Note that E provides the highest utility but the bundle costs more than $6 - D (low price elasticity means relatively low reduction in demand in response to price/tax increments - The diagram in the question is unclear. Please use this diagram to answer the ...