The Price Elasticity Of Demand For Airport Costs

The Price Elasticity Of Demand For Airport Costs
Market powers and competition Microeconomic theory states that a firm has market power when the
prices charged are higher that its efficient cost of production. It is this market power of airports that
brings in the need for regulation. The market power of airports has three main components –
Inefficient pricing by airports creates economic losses to the society in terms of deadweight losses.
There is also the question of quality of service in the absence of a regulatory environment. High
barriers to entry in this sector increases market power – o Investments made in airports are quite
indivisible over the short run. o Incumbent firms can perform better in this market due to the high
fixed costs. This provides economies of scale (Baumol et. Al., 1982). o Airports have high sunk
costs in the form of building infrastructure. o Network benefits of existing firms make it hard for
new firms to enter. The price elasticity of demand for airport costs is relatively inelastic as airport
charges constitute a small part of airfares. These three factors display the market powers of firms in
this oligopolistic market. In general, Airports face competition from 4 main sources (Tretheway and
Kincaid, 2006). This includes – Competition for serving a shared local market – This is a
geographical competition between airports which are located and have the ability to serve common
customers, or overlap customer base at the very least. A trend in the industry has been the
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Price Elasticity of Demand (25 Marks)
"Evaluate the view that the ability of firms to exploit their customers depends on the price elasticity
of demand for their products" 25 marks Callum Barnett Price elasticity of demand is the
proportionate change in demand for a good, following an initial proportionate change in the good's
own price. Most goods are either elastic or inelastic. Elastic demand means that consumers are
really sensitive to price changes. If the price goes down just a little, they'll buy a lot more. If prices
rise just a bit, they'll stop buying as much and wait for prices to return to normal. Inelastic demand is
demand for a good or service that does not increase or decrease in response to changes in price.
Demand for goods that are life necessities, such ... Show more content on Helpwriting.net ...
re, so they can keep raising their prices and for the firm they will keep benefitting from

Price Elasticity Of Demand Between All Nike Shoes
This article will focus on the comparison of price elasticity of demand between all Nike shoes sold
in Canada and all breads sold in Canada. I argue that all Nike shoes sold in Canada have a higher
price elasticity of demand than all breads sold in Canada due to three factors: the availability of
substitute goods, necessity and percentage of income.
The first factor is the availability of substitute goods, which are goods that can be utilized instead of
the original good. If there is a substitute good available, the demand is likely to change more
because people can buy different products. On the contrary, if an item has few substitute goods, it
may not gain or lose customers. In Canada, Nike shoes have lots of substitute goods like Adidas ...
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If the product coast a large percentage of the average consumer's income, people will pay more
attention to sale prices because they may be afraid of a fact that if the price keeps rising, they can't
afford it because it is expensive and costs most of their income. It is common that we spend more
than $200 on one pair of Nike shoes, which are quite expensive. However, the price of bread is low.
Furthermore, one pair of Nike shoes costs more percentage of clients' income than a piece of bread.
If the price declines, people would like to buy more Nike shoes because they can't afford it in
normal time. However, people won't buy too much bread than before because the bread may go
rancid quickly. So people are more sensitive to the price of Nike shoes. As a consequence, all Nike
shoes sold in Canada have more elasticity than all bread sold in Canada.
Unlike the price elasticity of demand, the price elasticity of supply plays an important role on how
producers respond to the change in price. I argue that all bread sold in Canada has more elasticity
than all shoes sold in Canada owning to three main factors, which are the availability of raw
materials, length and complexity of production and mobility of factors.
First, the availability of raw materials has an influence on raw materials because for more available
goods, producers are always more willing to increase production

Supply, Demand, and Price Elasticity Paper
Supply, Demand, and Price Elasticity Paper
2010
Learning Team A
University of Phoenix
10/17/2010
Petroleum is a necessity for the majority of humans across the world. Petroleum is a natural resource
that has few competitors. In recent decades alternative energy sources have been investigated, but
the use of petroleum is still ahead of the game as the world's primary energy source in the use of
automobiles, but petroleum is also the main ingredient in plastic. We use plastic everywhere, the
structure of our cars, furniture, computers, toys, and the list is endless. Petroleum is also an
ingredient in many fertilizers, used in clothing, and carpet backing. To understand the shifts of
supply and demand of petroleum we must ... Show more content on Helpwriting.net ...
It was once thought that oil was Price Inelastic, yet since the introduction of Hybrid cars, and people
cutting down their consumption of oil. Prices have dropped from over $4.00 a gallon and, their
demand for oil. The prices still creep higher and it fairly inelastic, but there is a breaking point in a
market once thought to be as inelastic as insulin.
The commodity of petroleum is not just important and inelastic in the market but also to the vast
majority of the world. There is no replacement for petroleum or the products that are derived from it.
Now a necessity product that is derived from petroleum would be gasoline which is use by a vast
majority of the world population for cars. Since there is no substitute for petroleum there is also no
substitute for gasoline.
Petroleum is a commodity in which there is no substitute for because of all the different products
that are made from this one commodity. Petroleum is used to make products that are used on a daily
basis by almost everyone around the world. These products include jet fuel, fuel for cars, diesel
fuels, and kerosene. These are the most popular products that are made from petroleum and since
there is no real substitute for these fuels there is no substitute for petroleum as a whole. There are
other items that are made from petroleum as well such as lubricants (motor oil), asphalt, and tar.
These items are also products that for the most are used on a daily basis by the majority of the
people around the

Price Elasticity of Demand
T 's Jean Shop sells designer jeans. The latest trend setter has been Capri cuffed blue jeans. The
demand for the Capri jeans has been very high with teenagers and young women. The business has
increased its supply of Capri jeans due to the high demand. The owner, Terri Johnson, contemplates
increasing the price from $9.00 to $10.00. Ms. Johnson needs to know the response of the
consumers to the increased price. According to McConnell and Brue (2004), the Price Elasticity of
Demand measures the rate of response of quantity demanded due to a price change (p. 1).
Using Price Elasticity of Demand
In calculating the Price Elasticity of Demand, we use the formula:
percentage change in quantity ... Show more content on Helpwriting.net ...
The negative sign (minus sign) is always ignored when analyzing price elasticity, so the Price
Elasticity of Demand is always positive (McConnell & Brue, 2004, p. 2). In the case of T 's Jean
Shop, the Capri pants calculated the price elasticity of demand to be 2.4005, which means the Capri
jeans are elastic and the demand is very sensitive to the price change. Ms. Johnson wants to
determine if any determinants and also how consumers are responding to a change in their income,
which is measured by the Income Elasticity of Demand.
Income Elasticity of Demand
T 's Jean Shop has no affect by determinants, except for substitute goods. Ms. Johnson has been able
to substitute the designer jeans and Capri pants look with a good generic quality from her supplier in
Mexico. However the shop needs to look how the new 10% salary increase by Louisiana State
University workers may affect demand for the Capri pants. According to McConnell and Brue
(2004), this is done by using the measurement, Income Elasticity of demand, which calculates as
follows (p. 16). percentage change in quantity demanded Ei = percentage change in income
Using the equation byEconomics.about.com, calculating the income elasticity of demand when
consumer 's income changes from 3% to 10% salary increase you have to calculate The percentage
of change in quantity demanded

Elasticity Of The Price Of Demand
According to the law of demand if the price increases the quantity demanded of a good or services
decreases. The law of supply states that the quantity of production of any goods increases only if the
market price of that good increase. These laws have been proposed by the economists in order to
measure the changing behavior of both the producers and the consumers. But these laws are not
always applicable everywhere as there can be various other factors controlling the demand and the
supply. Thus another quantitative measurement was introduced to explain more vividly the market
behavior of the customers as well as the producers. This is known as elasticity. As the price of a
product changes so does the demand changes ... Show more content on Helpwriting.net ...
Thus to anticipate the marginal revenue the company should use the price elasticity which the basic
factor in deciding the correct price. This sort of an economic analysis utilizes a particular
mathematical formula to delineate the theoretical and ideal relation between the marginal revenue
and the elasticity To set the correct pricing policies all the companies could use the price elasticity of
demand for their products. The optimal pricing policy would help the company to increase their
profit and allows that the prices of the goods be in synchronization with the market. The managers
should focus on the numerous factors affecting the elasticity so that they can establish the correct
price some of which are as follows. Availability of close substitutes The availability of close
substitutes is one of the basic factors. The best way would be to cut down the price if the product or
the service has too many competitors for instance a gas station. If in your station per gallon costs
$3.50 and the station across the road costs $3.20 you would lose many customers to them which in
turn would decrease the profit margin of your company. Product. The elasticity is affected by the
characteristics of the product itself. The customers are willing to pay a higher price for a product
only if it has got some unique quality. For instance a diamond ring with a particular kind

Assignment 2
Price Elasticity Of Demand
Price Elasticity of Demand is the quantitative measure of consumer behavior whereby there is
indication of response of quantity demanded for a product or service to change in price of the good
or service ( Mankiw,2007). The Price Elasticity of Demand is calculated using either the point
method or the midpoint method.
The Point Method
Price Elasticity of Demand = Percentage change of Quantity Demanded
Percentage change of Price
The Midpoint Method
Price Elasticity of Demand = (Q2 ' Q1) [ (Q2 + Q1)/2]
(P2 ' P1) [ (P2 + P1)/2]
Were:
Q1= initial Quantity Demanded
Q2 = new Quantity Demanded
P1=Initial Price
P2= new Price
(Source : ... Show more content on Helpwriting.net ...
"Higher cigarette prices result in decreased cigarette consumption, but price sensitive smokers may
seek lower priced or tax–free cigarette sources, especially if they are readily available. This price
avoidance behaviour costs states excise tax money and dampens the health impact of higher

cigarette prices" ( Hyland, Bauer, Abrams, Higbee, Peppone and Cummings, 2006). Certain brands
that are more expensive are elastic because they are easily substituted by cheaper more affordable
ones which remain inelastic because at the end of the day the consumer is satisfied.
The Uses of Price Elasticity When Making Prices Decisions For Producers
Since Price Elasticity shows how a good or service reacts after change in price this is a tool for
producers and they utilize this when making pricing decisions. It is crucial that producers know how
to maximize their revenue and the price they choose determines this. There is an effect of a change
in price on total revenue and expenditure of a product.
When a product is elastic the rise in price leads to the decrease in revenue due to the decrease in
quantity demanded being proportionally larger than the increase in price. Therefore producers can
make

Essay Supply and Demand and Price Elasticity
Technical Problem 10 Chapter 6 10. Use the figure below to answer the following questions: a.
Calculate price elasticity at point S using the method E=ΔQ × P ΔP Q E=ΔQ P+ 90 100 ΔP × Q=
−300× 60 =−0.5 b. Calculate price elasticity at point S using the method E=P P−A E=P × 100 = 100
=−0.5 P−A 100−300 −200 c. Compare the elasticities in parts a and b. Are they equal? Should they
be equal? The values of E in parts a and b are equal, as they should be, because the two methods are
mathematically equivalent formulas for computing price elasticity. d. Calculate price elasticity at
point R. E= P × 400 = 400 = −1. 33 P−A 400−700 −300 e. Which ... Show more content on
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The results of this estimation are as follows: DEPENDENT VARIABLE: Q R–SQUARE F–RATIO
P–VALUE ON F OBSERVATIONS: 24 0.8118 28.75 0.0001 VARIABLE PARAMETER
ESTIMATE STANDARD ERROR T–RATIO P–VALUE INTERCEPT 68.38 12.65 5.41 0.0001 P –
6.50 3.15 –2.06 0.0492 M 0.13926 0.0131 10.63 0.0001 PR –10.77 2.45 –4.40 0.0002 a. Is the sign
of bˆ as would be predicted theoretically? Why? The theory of demand predicts that price and
quantity demanded will be inversely related. Since b is negative, the estimate of b is consistent with
economic theory. b. What does the sign ĉ of imply about the good? Since cˆ is positive, the good is a
normal good. c. What does the sign of dˆ imply about the relation between the commodity and the
related good R? A negative coefficient of the price of related good R means that the price of R and
the quantity of X demanded are inversely related. In other words, X and R are complements. d. Are
the parameter estimates â, bˆ, ĉ, and dˆ statistically significant at the 5 percent level of significance?
The p–values show all parameter estimates are significant at the 5 percent level, or better. e. Using
the values P = 225, M = 24,000, and PR = 60, calculate estimates of Q = 68.38 – 6.50(225) +
0.13926(24,000) – 10.77(60) = 1,302 (1) The price elasticity of demand (Ê). Qˆ = bˆ(P/Q) = –
6.50(225/1,302) = –1.12 (2) The income elasticity of demand

Price Elasticity Of Demand And Demand
Price elasticity of demand is the relation of the virtual change in quantity demanded to the virtual
difference in price. Mathematically, price elasticity of demand is only the percent change in capacity
divided by the percent change in cost. In this essay the following issues will be discussed and
examples will be given. To begin with Price Elasticity of Demand will be explained provided with
illustrations. Furthermore the measurements of PED, the determinants, the five ranges, which will
be, mentioned later at last the relationship between price elasticity of demand with consumer
expenditure.
Demand elasticity means how perceptive the demand for a good is to fluctuations in other economic
variables. Demand elasticity is essential as it supports firms model the possible transformation in
demand due to changes in value of the good, the result of changes in prices of further goods and
numerous other market factors. A firm grasp of demand elasticity benefits to direct firms regarding
more ideal competitive performance. Demand elasticity is a measure of how great the capacity
demanded will be different if additional factor changes. An example is the price elasticity of
demand; this measures how the quantity demanded fluctuates with price. This is fundamental for
setting prices so as to maximizing profit.
The price elasticity of demand is found by dividing a specific change in capacity by the change in
price, which produced it. The changes are constantly balanced, or

The Relationship Between The Price Elasticity Of Demand
The Relationship between the price elasticity of demand and total revenue and Impacts of various
forms of elasticities on business decisions and strategies to maximize profit. Price elasticity of
demand enables business organizations to predict how their total revenue will be effected in the
event they change the prices of their products. When a given good has inelastic price elasticity of
demand i.e. Ed 1, then the percentage change in the quantity demanded is greater that the change in
price. Thus, raising the prices of such commodities results to decline in the total revenue because the
business may loss customers to their competitors. Nonetheless, reducing the prices of goods with
elastic elasticity of demand increases the total ... Show more content on Helpwriting.net ...
Based on the above description, forms of elasticity will affect business decisions and pricing
strategies differently depending on the nature and type of products or services being offered.
Business organizations whose product offerings have elastic and perfectly elastic price elasticities of
demand should not attempt to raise prices of their products because it will cause the quantity
demanded and consequently total revenues to drop drastically. Businesses can there use the price
elasticities of demand to determine whether the proposed changes in their prices will raise or reduce
their total revenue. The following expression may be useful in helping business organizations to
determine the impacts of elasticities on their total revenues based on the suggested price changes.
Total Revenue=Price×Quantity When the elasticity of demand is elastic, the change in quantity will
be greater that the change in price. Hence, the total revenue will reduce with increasing prices and
increase as prices decrease. However, if the business offers goods or services with inelastic price
elasticity of demand, then the change in quantity demanded will be smaller than the change in price.
Consequently, the total revenue, which is a product of the two will increase when

Why Price Elasticity Of Demand Has Impacted Decisions Made...
Any business follows a specific market structure and is categorized by a type of elasticity. The
business that I work for is a laundromat in the city of Greeley. Although the business is small and
locally owned, it follows a Monopolistic Competition market structure. The business has recently
been experiencing the theory of Price Elasticity of Demand. It is important to explain the idea of
Monopolistic Competition and how the laundromat falls under this market structure. It is also
important to know how Price Elasticity of Demand has impacted decisions made for the future of
the business. The remainder of this work will define both Monopolistic Competition and Price
Elasticity of Demand. It will also explain how the business I work for is a product of both. Price
Elasticity of Demand is the theory of elasticity that focuses on the relationship between the price and
the demand for a good or service. The study of how sensitive consumers are to a price change, is the
study of Price Elasticity of Demand (Anderson). The idea is that when there is a change in the price
of a good or service the demand will also change. In order to predict consumer behavior suppliers
will study the consumer's responsiveness to price change. Price Elasticity of Demand is measured by
a difference in percent changes. The difference between the percent change in demand and the
percent change in price (Anderson). If there is a larger respond in the amount demanded due to the
price change the good or

Research Report: the Price Elasticity of Demand
Managerial Economics Research Report: The Price Elasticity of Demand
The Price Elasticity of Demand: 1. Introduction: Price elasticity of demand is an economic measure
that is used to measure the degree of responsiveness of the quantity demanded of a good to change
in its price, when all other influences on buyers remain the same. Elasticity of demand helps the
sales manager in fixing the price of his product, deciding the sales, pricing policies and optimal
price for their products. The evaluation of this measure is a useful tool for firms in making decisions
about pricing and production which will determine the total ... Show more content on
Helpwriting.net ...
Hence, when the price is raised, the total revenue falls to zero. For better understanding let us
illustrate the graph. A set of graphs shows the relationship between demand and total revenue (TR)
for a linear demand curve. As price decreases in the elastic range, TR increases, but in the inelastic
range, TR decreases. TR is maximized at the quantity where PED = 1. Hence, as the accompanying
diagram shows, total revenue is maximized at the combination of price and quantity demanded
where the elasticity of demand is unitary. Since firms facing an elastic demand can increase total
revenue when they cut prices, the opposite condition exists when they try to raise prices. With many
substitutes in consumption available, a price increase leads to a significant decline in consumption –
the percentage change in quantity demanded exceeds the percentage change in price. Producers that
raise prices when facing an elastic demand will find that total revenues decrease as the gain from
charging higher prices is more than offset by a desertion of consumers to cheaper substitutes, with
sales and output falling. When price

Supply, Demand and Price Elasticity of Coffee
When many individuals wake up in the morning, the first thought they often have is: where is the
coffee? The price of coffee fluctuates no matter what quantity is sold. The following paper will
discuss what makes the price of coffee rise and what consumers do when the price is more than they
are willing to pay. Many factors are taken into consideration when the price of coffee is being
determined. The main two factors are the supply that is demanded and the availability of substitutes,
which will be discussed below. Coffee is a commodity enjoyed all over the world. Bistros in Paris to
large franchise chains in the United States; the fact is people love coffee. Take a look at the causes
for shifts in supply and demand for one ... Show more content on Helpwriting.net ...
Some would say that coffee is a luxury, while others will argue that coffee is a necessity. Since a
good is considered a necessity when the quantity that consumers buy is not dependent on its price
then coffee is considered a luxury. This was chosen because the quantity that people buy is
dependent on its price. With there being substitutes for coffee that are less expensive, consumers
will quit buying coffee when the price is too high (Hubbard & O'Brien, 2010).
Most consumers buy coffee as a result of wanting the caffeine coffee supplies. Instead of buying
coffee, consumers could choose to purchase another beverage with a high level of caffeine, such as a
carbonated beverage, tea, or even an energy drink, or shot. Some consumers may also decide to
purchase caffeine pills from a local pharmacy instead of forking out the cost for coffee. The price
elasticity of coffee is impacted primarily by the amount of substitutes that can replace it. These
substitutes could be considered a necessity or a luxury. The more substitutes a product has, the
greater price elastic the product. Luxuries have more of price elasticity because luxuries are not
considered to be something needed to survive. With coffee having many substitutes and being a
luxury it has a high elasticity (Hubbard & O'Brien, 2010). In conclusion, coffee prices may rise and
fall periodically throughout the year. Whether someone is just waking up, or taking a stroll down

The Price Elasticity Of Demand
Price elasticity of demand is defined as a measure of "the responsiveness or sensitivity of consumers
to changes in the price of a good or service" (Thomas & Maurice, 2012, pp. 199). Mathematically,
the price elasticity of demand is calculated by dividing the percentage change in quantity demanded
by the percentage change in price. Demand is said to be elastic whenever the absolute value of the
percentage change in quantity demanded exceeds the percentage change in price, which means the
absolute value of the elasticity would be greater than one. If the absolute value of the price elasticity
of demand is less than one, the demand is said to be inelastic, or less sensitive to the price change.
There are various factors that affect the price elasticity of products, in the following sections these
factors will be applied to the demand of desktop computers.
The first factor which is the "most important determinant of price elasticity of demand" is the
availability of substitutes (Thomas & Maurice, 2012, pp. 205). For any product where quality
substitutes are readily available, the price elasticity of demand will be high. For example, if the price
of desktop computers was to rise by 20%, the quantity of desktop computers demanded would most
likely decrease by a greater percentage. This is because consumers could easily go out and purchase
laptop computer or tablets to accomplish tasks for which they needed the desktop computer.
Likewise, if the price of desktop computer

Classification of Price Elasticity of Demand
Classification of Price Elasticity of Demand 1. Price Elastic Demand (% ΔQd > % ΔP) ϵ > 1 If the
value of price elasticity coefficient is greater than one in absolute value. This means that a small
change in price results to a greater change in quantity demanded. Goods which are elastic tend to
have some or all of the following characteristics: They are luxury goods They are expensive and a
big % of income e.g. sports cars and holidays Goods with many substitutes and a very competitive
market. E.g. if Simsbury's put up the price of its bread there are many alternatives, so people would
be price sensitive Bought frequently Graph: We say a good is price elastic when an increase in
prices causes a bigger % fall in demand. e.g. if price ... Show more content on Helpwriting.net ...
For example, if Sky increase the cost of premiership pay per view, many football fans will pay the
extra price. Though because it isn't a necessity, demand may be less inelastic than say petrol. Tap
water. For householders, tap water is a necessity, with no alternatives. If the water company increase
the cost of water bills, people would keep buying the service. It would have to rise to a very high
price before people disconnected their water supply. This is why tap water is regulated. Diamonds.
Bought very infrequently, diamonds are the ultimate luxury with few exact alternatives. You could
buy other precious gems, but others may not have the same allure as diamonds. A cut in price
wouldn't increase demand very much. Peak rail tickets. For commuters who rely on the train to get
to work in London, demand will be very inelastic. If price of fares from Surbiton to London
increase, demand will only fall by a small amount. The alternatives for commuting into London,
such as driving are limited. Apple iPhones, iPads. The Apple brand is so strong that many
consumers will pay a premium for apple products. If the price rises for apple iPhone, many will
continue to buy. If it was a less well known brand like Dell computers, you would expect demand to
be price elastic. References: http://www.economicshelp.org/blog/7019/economics/examples–of–
elasticity/ 3. Unitary Elastic Demand (% ΔQd = % ΔP) ϵ < 1 If the value of elasticity

Essay On Supply Demand And Price Elasticity
Supply, Demand, and Price Elasticity
We use multiple products on a daily basis, from toothpaste to ink pens. Though we may use these
items for mere moments, there is a different supply and demand cycle for them. Every product has a
different supply and demand cycle, and this cycle varies throughout time. Some items may
constantly be in demand, like cotton, and others may be in demand seasonally, like eggnog. These
shifts in supply and demand may influence the price of certain products, how much of the product is
available at any given time, etc. Commodities available during only peak times throughout the year
may even be substituted with a similar item. These seasonal items are considered ... Show more
content on Helpwriting.net ...
The production of polyester is considered as planet polluting. Another substitute would be Organic
cotton, which is pesticide free and tinted naturally. Hemp is also a good substitution for cotton.
According to the Hemp Industries Association, hemp has fewer pesticides than cotton. Cotton, when
blended with other fabrics, can be substituted for 100% cotton making it less expensive than other
fabrics like linen, wool, spandex, silks, and lycra.
Because cotton is so popular, an increase in price does not automatically mean that there will be a
decrease in the quantity demanded. Since the first choice for clothing is cotton, people will continue
to purchase clothing and there will not be an effect on the supply demanded, even with a price
increase. With essential commodities, price increases will not negatively affect the quantity
demanded. Cotton has an inelastic demand because the quantity is not affected (Elastic and Inelastic
Demand).
Cotton is one of the most widely used products today. It is noted as having an inelastic demand
because of the various other products that can be used in place of it. A change in price will more
than likely have no effect on the decision to utilize its benefits, as it is present in many luxury and
necessity items. However, if pricing is changed, causing a change in demand, businesses could

Supply, Demand and Price Elasticity Paper
Every day people use products without thinking about the significance of that particular product.
Many people do not realize how important these products are and how much one product that is
used every day affects the economic status of not only the country but the world. Wheat is used to
make a large number of products which include beer and bread. The next few pages of this report
will discuss how supply and demand for wheat shifts, how it affects price, and whether or not wheat
is a luxury or a necessity will also be analyzed. Wheat, a main staple in food and a source for many
products, is a global commodity with diverse supply availability and changing demands. Each
country has its own production, consumption and exportation of ... Show more content on
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When a good is a necessity it is something that is needed; unlike a simple desire to have something.
These items have more of an inelastic demand even if the prices fluctuate. Wheat is a rich
commodity in our country. The demand for wheat is inelastic. No matter how high the price rise the
demand will still remain high in view of the fact that the price is determined by supply and demand.
There are many producers of wheat which does not raise the profit level much for the farmers since
their competition are all selling identical products. Other items, such as; basics in personal care,
food, commodities, and medicine. The basic items that are needed to survive. Demands for these
items may change over time but will not change very much. Their value can fluctuate if there are
comparable substitutes available. Personal care items such as clothes and shoes are not in a single
category where choices are concerned. There are a wide variety of manufactures and stores that sell
them. So if the price raises the demand would be elastic because of substitutes. Food as a basic need
is inelastic. However, if the prices were to rise on beef consumers could choose to substitute eating
chicken, turkey, or pork instead. So even though the prices rose the demand would not increase
because of acceptable substitutes. Medical service as a necessity is inelastic in demand. This is a
service that is unquestionably needed for survival.

Price elasticity of demand
In economics and business studies, the price elasticity of demand (PED) is an elasticity that
measures the nature and degree of the relationship between changes in quantity demanded of a good
and changes in its price.
Introduction
When the price of a good falls, the quantity consumers demand of the good typically rises; if it costs
less, consumers buy more. Price elasticity of demand measures the responsiveness of a change in
quantity demanded for a good or service to a change in price.
Mathematically, the PED is the ratio of the relative (or percent) change in quantity demanded to the
relative change in price. For most goods this ratio is negative, but in practice the elasticity is
represented as a positive ... Show more content on Helpwriting.net ...
It may be possible that quantity demanded for a good rises as its price rises, even under conventional
economic assumptions of consumer rationality. Two such classes of goods are known as Giffen
goods or Veblen goods. Another case is the price inflation during an economic bubble. Consumer
perception plays an important role in explaining the demand for products in these categories. A
starving musician who offers lessons at a bargain basement rate of $5.00 per hour will continue to
starve, but if the musician were to raise the price to $35.00 per hour, consumers may perceive the
musician's lessons ability to charge higher prices as an indication of higher quality, thus increasing
the quantity of lessons demanded.
Various research methods are used to calculate price elasticity:
• Test markets
• Analysis of historical sales data
• Conjoint analysis
Mathematical definition
The formula used to calculate the coefficient of price elasticity of demand for a given product is
This simple formula has a problem, however. It yields different values for Ed depending on whether
Qd and Pd are the original or final values for quantity and price. This formula is usually valid either
way as long as you are consistent and choose only original values or only final values.
A more elegant and reliable calculation

Supply, Demand & Price Elasticity
Supply, Demand and Price Elasticity
People and companies make economic decisions on a daily basis by deciding how much of
something they will buy and what prices they are willing to pay for the goods or services. Through
individual decision–making, consumers determine supply demands for their needs and wants, and
companies decide which goods and how many goods are to be sold, and how much to charge
consumers. There are many fundamental concepts and definitions that are important to
understanding the economics. The concepts that will be discussed in this paper are supply, demand,
and price elasticity.
Demand Variables Demand is defined as the amount of a good or service that consumers are willing
and able to purchase (Hubbard & ... Show more content on Helpwriting.net ...
According to Hubbard and O'Brien, these technological changes are usually positive changes for the
company and help them find ways to make their inputs go farther, or cost less. The price that other
companies are charging for substitutes will also affect supply. If a substitute product has a low price,
consumers are more likely to go with that product. Many times, companies are forced to lower their
prices to compete with comparable products. The number of companies that enter the market
changes the supply as well. More companies in the market mean more comparable products will be
produced. Companies also look at future price expectations when deciding how much to supply. If
economists predict that prices will increase in the future, it benefits the company to withhold some
of the supply. Walt Disney Films does this with their VHS/DVD collections. They keep their movies
in a 'vault' and re–release them every few years. Disney has created demand for their product due to
the limited release and availability of their product. Companies should increase production when
they can charge more for their product, as they can lose money if they are slow to respond to
demand.
Market Equilibrium
The purpose of the market is to bring buyers and sellers together, with the interaction between the
two leading to production of what consumers want most. This is also known as

Products, Services, and Prices in the Free Market Economy:...
Domino 's Pizza, Inc
In 1960 Tom Monaghan and his brother James bought DomiNicks, a pizza store in Ypsilanti,
Michigan. In 1965 the company name was changed to Domino 's Pizza. Domino 's Pizza is one of
the leading companies in the pizza delivery industry in the United States and around the world. The
company headquarters is located in Ann Arbor, Michigan and they employ approximately 13,500
people. Total revenue was registered at $1,511.6 million during the fourth quarter of 2005, a growth
of 4.5% over 2004. The performance gain of the company was $199.1 million during the fiscal year
of 2005, a growth of 16.2% over 2004. The pure gain was $108.3 million in the fiscal year of 2005,
a growth of 73.8% over 2004. Domino 's enterprise ... Show more content on Helpwriting.net ...
At $7 the price elasticity for consumers also increased and bought more pizza at this price than at
any other price sold.
Time
According to the graphs provided above, with prices ranging from $10–$4 during certain periods
and the company making price adjustments, the price elasticity remained most valuable at $7. At
this point, the company realizes that $7 is where they are making most of their profit and that is the
reason Domino 's Pizza would leave their product on the market at this price for a longer time. It
takes time in order for consumers to adjust to a specific product at a new price. The longer Domino
's Pizza has their product on the market at this price, the greater the demand. This demand will help
increase the company 's revenue. At this time Domino 's Pizza would test one of his other products
to see if that product has as much of a demand as pizza at its selling price. The concept of time is
looking to see if the demand of the company 's product rises over a certain period. Throughout this
time, the company can introduce another product similar to pizza and determine if consumers are
willing to have the same demand for this product.
Conclusion
Domino 's Pizza can take advantage of the elasticity of the demand to maintain a steady source of
high revenues. Increasing the pizza prices will provide more revenues but will decrease the demand
and the revenues will

The Changing Price Elasticity of Demand for Domestic...
The Changing Price Elasticity of Demand for Domestic Airline Travel
Consumers make economic decisions as to what they buy based largely on price. More specifically,
the change in the amount of a good purchased is often highly dependent on its change in price. That
measure of responsiveness is defined as the price elasticity of demand.
Mathematically, it is often expressed as: Ed
= – percent change in quantity demanded / percent change in price, or –(dQ/Q)/(dP/P). The minus
sign is often omitted because price elasticity of demand is presumed to be negative. If Ed = 0, it is
perfectly inelastic, a change in price does not affect the quantity demanded. If 0 >Ed
>–1, it is relatively inelastic, the quantity demanded does
not ... Show more content on Helpwriting.net ...
Multiplicative: Y= (X)a
(X1)b
(X2)c
, in which each independent variable interacts with other independent variables.
The bulk of aviation demand models have been of the multiplicative form to utilize that interaction.
Fortunately, the multiplicative form can be readily converted to a linear form by simply taking the
logarithms of all variables. One difficulty with both model types if using actual data is the effect of
the numerical value (size) of the variables themselves. Different scalar size in the variables tends to
mask the effect of which independent variable has a greater effect on the dependent variable. While
one correction to scalar effects may be to use what is known as standardized or beta coefficients,1
the models developed below will be based on the percentage change in the variables from one year
to the next, rather than the level of the variable.
In this manner the scalar differences are also eliminated. In Part D, Results and Conclusions, the
development of the model form is shown in steps, using actual data. 3
Models may also be developed with or without a constant (trend) factor. In a model without a
developed constant, the trend is subsumed in the coefficients of the remaining independent
variables, and may bias those coefficients. All equations in this paper use a constant term.
Part C. The

Equilibrium Price and Quantity, Economic Systems;...
Economics Assignment 1 i) Equilibrium price and quantity;
The Equilibrium price is set when the supply and demand meet when the quantity demanded by the
customer (market demand) and the quantity that the companies (suppliers) are willing to supply the
goods/services.
For example if you take a look at this graph you can see that at the cross section, where the lines of
supply and demand meet, the equilibrium point is shown. This is the "market clearing price" where
supply equals demand.
Equilibrium Point;
Equilibrium Point;
Figure 1–Sourced from Bized
Market clearing price is used as a justification to what price they should sell at. This is to help the
market be clear of all shortages and surpluses, for instance if there is ... Show more content on
Helpwriting.net ...
The CPED tends to focus on the interactions between changes in the prices of substitutes and
complement goods and how they affect demand. It is calculated as the; percentage change in
demand of product A divided by the percentage change in price of product B.
Substitute Goods (next best thing) are similar and alike to another good, therefore we expect that
when the price of one good increases, the demand for the other good increases. Complementary
Goods (goods which accompany a good, for example car and petrol) are affected if the demand for
the good increases with demand for another good.
If two goods are substitutes, we should expect to see consumers purchase more of one good when
the price of its substitute increases. Similarly if the two goods are complements, we should see a
price rise in one good cause the demand for both goods to fall
If goods are compliments, the CPED will be negative, for instance when the charge of DVDs rises,

In January 2008, gasoline prices were $3 a gallon with an increase of 33 percent price of gasoline
was $4 a gallon in June 2008. Between the January and June 2008 time period the quantity of
gasoline purchased decreased by 3 percent. After gathering the required information, the second step
is to calculate the price elasticity of demand (PEoD) for gasoline is to calculate the percentage
change in price which is done by using the following formula. [Price New–Price Old] / Price Old.
The numbers plugged into the equation is [4–3] / 3=.3333 or 33 percent. The percentage change in
price equals 33 percent. The third step is to calculate the percentage change in quantity demanded.
This is done by using the following equation [Demand New–Demand Old] / Demand Old. The
information provided above states that the percent change in quantity demand is 3 percent, which
means that there is not a need to calculate the percent change in quantity demand. The final step of
calculating the price elasticity of demand is done by completing the following formula of PEoD =
(% Change in Quantity Demanded) / (% Change in Price). When the numbers are plugged into the
equation it is 3% / 33% =.0909 or 9 percent. The price elasticity of demand for gasoline is 9 percent.
The price increase of gasoline will impact the consumer and producer surplus. The area between the
demand curve and the price line for the quantity of gasoline sold provides the consumer surplus. The
consumer surplus decreases when the

What Determines The Price Of Elasticity Of Demand
1.) Availability of Substitutes: This is the most important factor of what determines the price of
elasticity of demand. Goods or services that have close similar substitutes will typically have more
elastic demands associated with them (Jerelin, n.d.). 2.) Proportion of the Consumer's Income Spent:
This is essentially the amount of the consumer's money that is spent on a particular good or service.
The higher the amount of their income that is spent on a good directly influences the elasticity of
demand for it. Alternatively, the lower the amount of income spent, the lower a goods elasticity of
demand is. 3.) Time: In many instances, including this one, the saying "time is money" applies.
When the price of a good changes the elasticity ... Show more content on Helpwriting.net ...
Hospitals could raise their prices for emergency and medical care, however, I do not believe it
would have much of an effect of the demand for these services. If someone really needs to be treated
by an ED, it is safe to assume they are not going to take the time to find a less expensive hospital as
a substitute to receive care at. They are going to need to be seen at the closest facility. Especially
when it comes to a life or death situation. I think that emergency services could be considered to be
perfectly inelastic. Unless of course, the medical care that was being provided was an elective
procedure like plastic surgery. This would be considered an extreme case of price elasticity. During
the short run, the number of seats most likely cannot be altered. Unless there are temporary seats
that are brought in. Even if a higher price was charged for each seat, there are only a limited set
number of seats. So, once the football stadium sells out for a game or concert, that is it. It is at
maximum capacity. This would be considered to be a perfectly inelastic supply for a football
stadium. As for the long run elasticity of supply for the football stadium, it would remain the same
as long as it did not expand and add seating. If they did decide to add additional seating to the
football

Netflix Price Elasticity Of Demand
The purpose of this research paper is to analyses Netflix Inc. and the industry it is a part of. Through
analyzing microeconomic principles such as supply and demand, price elasticity, costs of
production, and the overall market, I will be able to make informed recommendations about how the
company should proceed in the future to maintain its success. To expand on the topics mentioned in
the previous paragraph, in this research paper, I will evaluate trends in demand and their impact on
the business as well as analyze how the information on supply and demand will support the
recommendations I make. In examining the cost of production, I will outline the cost Netflix faces
over time and how that effects its success as well as evaluating the different kind of costs the
company faces and how they affect the output level and how they information output decisions. To
examine the price elasticity of demand of the services and products that Netflix sells, I will explain
how I determined the price elasticity of demand, discuss what factors affect consumer
responsiveness to price, and analyze how these factors influence the Netflix's pricing decision and
growth. To investigate the overall market that Netflix is a part of, I will examine the ... Show more
They wished to create a website where people could buy and rent DVDs to be shipped to them,
without having to leave their house. In April 1998, the company began doing business, offering
short term DVD rentals, as well as selling DVDs (Funding Universe, n.d.). However, due to the
limited number of houses that had DVD players, sales were not high, despite the company having
few competitors. In order to rectify this problem, Netflix worked in conjunction with companies like
Toshiba, HP, Apple, and Sony to promote DVD players and computers with DVD drives (Funding
Universe, n.d.). While this marginally improved sales, Netflix still had few

Assignment 2 Operations Decision Mitchell White Economics Dr. Obi In the demand analysis for
the product of this particular firm, we have found that the price elasticity of demand is 1.2. This
implies that with a 1% rise in price, quantity demanded falls by 1.2%. Therefore, the expenditure on
the good remains almost the same. The firm cannot hope to increase market share by decreasing the
price. The revenue earned by the firm will remain the same whether it increases or decreases the
price as the demand is almost unitary elastic. There is a fair amount of competition. The elasticity
with respect to the price of the close competitor's product is 0.68. This is less than one. With 1%
increase in price of the competitor's product, there is a 0.68% (<1%) increase in demand for the
incumbent's product. That means the demand for the product is not very sensitive to change in the
price of the close substitute. This interpretation of the cross elasticity points to the existence of
significant differentiation in the product. Even with a fall in the price of the close competitor's
product, the demand does not fall to a large extent. The two elasticities point to the fact that there is
a preference for the firm's product. The discussion above suggests that the market is characterized
by monopolistic competition. There is limited scope for price competition. The firms mainly
compete through advertisements and product–differentiation. The scenario we are dealing with

Price Elasticity Of Demand Essay
CHAPTER
6|
Elasticity:
The Responsiveness of Demand and
Supply
SOLUTIONS TO END–OF–CHAPTER EXERCISES
Answers to Thinking Critically Questions
1. Even if the overall demand for gasoline is inelastic, a revenue increase for Joe's Gas–and–Go will
occur only if the percentage increase in price is greater than the percentage decrease in quantity
demanded. If
Joe's price increase is too large and Joe has other competitors who do not raise their prices, then it is
possible that the percentage decrease in quantity demanded will result in a decrease in total revenue.
2. If Wal–Mart and Sam's Club begin selling gasoline at lower prices than the conventional service
stations, this will cause the demand curves faced by the ... Show more content on Helpwriting.net ...
Total revenue fell during this time from $36,359,219 to $33,312,474.
123
CHAPTER 6 | Elasticity: The Responsiveness of Demand and Supply
1.8
No, we don't have enough information to calculate the price elasticity of demand. To calculate the
price elasticity of demand we would need to know how the quantity demanded changed in response
to a change in price keeping all other things constant. In this case other things were not held
constant: academic offerings were bolstered with at least three hands–on experiences outside the
classroom, which created a "buzz." This suggests that there was a shift in the demand curve and not
just a movement along it. 1.9
Using the midpoint formula, the percentage change in price = ($99 – $199/$149) = –67%. Using the
midpoint formula, if sales double, then the percentage change in quantity will equal 67%. The price
elasticity of demand is 67%/–67% = –1. Using the midpoint formula, if sales triple, then the
percentage change in quantity demanded will equal 100%. In this case, the price elasticity of
demand will be 100%/–

67% = –1.49.
1.10
Suppose Ford did

Supply & Demand, and Price Elasticity
Supply & Demand, and Price Elasticity
All things in our society are connected in some way, for example, how humans relate to each other.
Complex ideas and analysis are not without their own set of unique connections. The intricate
theories of economics are a prime example of this connection. To gain an accurate understanding of
how supply and demand are connected, and its role within the market, one must analyze the
functions of each as separate entities, and how they relate to economics as a whole.
To begin analysis, one must examine what causes change between supply and demand. Once this
has been achieved, investigating how changes in price and quantity influence market equilibrium,
and how the necessity of a good and the availability ... Show more content on Helpwriting.net ...
If the price of the good goes up, the consumer will buy less of the good, if the price of the desired
good decreases, the consumer will purchase more of that good. This concept applies to all the
variables listed above. A change in price in either direction is going to affect the consumer's decision
to acquire the good. A good way to look at all the variables is isolating each variable to determine
the effect of each with respect to the elasticity price. The key to elasticity is that it is a unit–less
measure. The exact number of units does not matter; the ratio of the percentage changes in quantity
divided by the percentage change in price.
Additionally, time and budget percentages are variables of elasticity price. The longer a consumer
has to look for an option to buy the good will determine the effect of the result to elasticity price. A
product that requires a large percentage of the consumer's budget will make the good elastic. The
above variables are examples of how necessity of a good can affect the price elasticity of a product.
A competitive market is a group of buyers and sellers of a particular good or service which the
individual buyer or seller has no impact on the price of the traded good or service. In the market
there are two main systems: demand curve and supply curve. The demand curve shows the
relationship between the prices of a good or service that consumers are willing and

Synopsis of Price Elasticity of Demand on Automobile Industry
One definition of elasticity is what happens to consumer demand for a good when prices increase.
As the price of a good rises, consumers will usually demand a lower quantity of that good, perhaps
by consuming less, substituting other goods, and so on and the demand of complementary product
will also be less. The greater the extent to which demand falls as price rises, the greater the price
elasticity of demand. Conversely, as the price of a good falls, consumers will usually demand a
greater quantity of that good, by consuming more, the demand of complementary will also rise,
dropping substitutes, and so forth. However, there may be some goods that consumers require,
cannot consume less of, and cannot find substitutes for even if prices ... Show more content on
Helpwriting.net ...
If the oil price will rise, the demand of auto industry will decrease. We will measure the
responsiveness in the demand for commodity to a change in the price of commodity. The cross–
price elasticity of demand is very important concept in managerial decision–making. Firms often use
this concept to measure the effect of changing the price of a product they sell on the demand of other
related products that the firm also sells. A high positive cross–price elasticity of demand is often
used to define an industry, since it indicates that various commodities are very similar.
Further, elasticity will normally be different in the short term and the long term. For example, for
many goods the supply can be increased over time by locating alternative sources, investing in an
expansion of production capacity, or developing competitive products which can substitute. One
might therefore expect that the price elasticity of supply will be greater in the long term than the
short term for such a good, that is, that supply can adjust to price changes to a greater degree over a
longer time.
This applies to the demand side as well. For example, if the price of petrol rises, consumers will find
ways to conserve their use of the resource. However, some of these ways, like finding a more fuel–
efficient car, take time. So consumers as well may be less able to adapt to price shocks in the short
term than in the long term.

Price Elasticity of Demand and Supply
Q. Discuss how a supplier of a product that is currently fashionable might use both of these concepts
in making price and output decisions.
The price elasticity of demand measures the sensitivity of the quantity demanded to price. The price
elasticity of demand is the percentage change in quantity demanded brought by a 1 percent change
in price. The value of price elasticity of demand for a normal good must always be negative,
reflecting the fact that demand curves slope downward because of the inverse relationship of price
and quantity.
The price elasticity of demand can be an extremely useful piece of information for business firms,
nonprofit institutions, and other organizations that are ... Show more content on Helpwriting.net ...
The price elasticity of supply tells us the percentage change in quantity supplied for each percent
change in price. The value of price elasticity of supply for a normal good must always be positive,
reflecting the fact that supply curves slope upward because of the positive relationship of price and
quantity.
Similarly as price elasticity of demand, price elasticity of supply can be also an extremely useful
piece of information for business firms in deciding how much to produce their products. To see why
a business might care about the price elasticity of supply, let's consider how an increase in price
might affect a business's total revenue. Since price and quantity have a positive relationship in price
elasticity of supply, a higher price will generally mean producing at a higher quantity, so the total
revenue will increase. Economists have classified the possible range of values for price elasticity of
supply as 'Inelastic Supply, 'Unitary Elastic Supply, and 'Elastic Supply'. In the process of helping a
supplier of a product that is currently fashionable to decide output decision, we must first identify
the classification that the product is in right now as being 'fashionable'. As mentioned earlier, the
price elasticity of supply is used to see how sensitive the supply of a good is to a price change. The
higher the price elasticity, the more sensitive producers and sellers are to price changes. A very high
price elasticity suggests

Distinguish Between Price Elasticity of Demand, Cross...
Title: Distinguish between price elasticity of demand, cross elasticity of demand and income
elasticity of demand. What actions might be taken by countries and companies to reduce or limit
price fluctuations?
Class: Business J
Student: Ibrokhim Parviz
Student ID: 99592
Tutor name: Sally
Word account:
Introduction:
Nowadays in modern developed market change in prices and other factors are very expected. The
change in one of the factors for instance price and effect of it on another factor like demand or
supply are measured by elasticity. Elasticity is the measure of how the change in one of the factor
will be affected on the other factors. Elasticity measures extent to which demand will change.
Measure easily can be calculated in ... Show more content on Helpwriting.net ...
Calculate the price elasticity of supply.
Solution: 20/10=2, so product is elastic.
Elastic demand curve of the Good X
P
P1
Price
/
0 Q Q1 Quantity
The prices of commodity goods are going up and down. The reason of price fluctuation is changes
in supply or demand. Equilibrium in price find when supply and demand will intersect each other.
The change in one of them will cause price fluctuate. For instance the problem with supply may
cause poor harvest or loss in production. Change in demand can be caused by change in technology,
income or substitutes (Parkin 2010). Mostly in agricultural or commodity markets there is large
price fluctuation in price in very short time. This can give negative impact on producers, for instance
they may have over or under production in short term; or calculate over or under investment in long
terms. Also prices can be too high for essential goods, like bread or rice, problem with this goods
can cause a disorder in country caused by young adults which not satisfied with high prices, similar

situation was in Egypt in 2011. On the other hand prices can be too low, for instance cigarettes, its
generally known that smoking harms health, governments to protect citizens making new rules, for
which they spend money, for that reason it can make negative impact on governments economic.
Another

Price Elasticity Of Demand Essay
a. Describe the price elasticity of supply or demand for your product or service. The price elasticity
of demand for the iPhone is different depending upon on where it is being sold. A prime example if
the IPhone is being sold in the United States it is considered an inelastic demand. Most smartphones
are considered a luxury item but if you compare that to the first world country, it is different. The
average incomes in the United States are considered higher than most countries, therefore the price
of an iPhone 5 or iPhone 6 are considered affordable. The price elasticity of demand of an iPhone in
high income nations is considered inelastic. The price elasticity of demand of the iPhone in
countries like, Malaysia are considered as elastic. The iPhone is considered as an elastic demand in
countries where the average income is not that high compared to the first world countries. Thus, the
price elasticity of demand is elastic, the price of an iPhone is considered expensive to us but the
popularity of iPhone is still high so if the price of an iPhone is dropped, the demand would increase
higher. The price elasticity of supply of an iPhone is considered as elastic during the early period. .
The determinants of price elasticity of supply are the amount that costs as output rises, which means
the lesser the additional costs of producing additional output, the more Apple will produce for a
given increase. There an iPhone's hype that slowly affected the community which mean

Price Elasticity : Supply And Demand Model
Price Elasticity
Introduction: The business analysts put forth a great deal of subjective expressions about how
consumers as well as producers carry on. The law of demand expresses that the good quantity that is
demanded or services for the most part declines, and the law of supply expresses the quantity of the
good which is produced has a tendency to increase at the business sector cost of that increase in
good. These laws don 't catch everything that financial analysts might want to think about the supply
and demand model, so they created quantitative estimations, for example, flexibility to give more
insight about business sector conduct.
It is, indeed essential in a great deal of circumstances to see subjectively as well as ... Show more
Price elasticity is generally negative, as indicated in the above sample. That implies that it takes
after the law of demand; as price increases the demand for quantity decreases. As gas price goes up,
the quantity of demanded gas will go down. Eg: positive price elasticity can be found in case if
caviar. The purchasers of caviar are for the most part well off people who trust that the more costly
the caviar is, the better it must be. Accordingly, as the cost of caviar goes up, the amount of caviar
requested by rich individuals goes up also. [2] The Range of Responses: The level of reaction of
quantity requested to an adjustment in cost can vary extensively. The key point for measuring
elasticity is whether the co–efficient is more prominent or not exactly proportionate. When the
quantity which is demanded change proportionately then the estimation of PED is 1, which is called
'unit elasticity '. Thus, PED can be:
1, which means PED is elastic.
Zero (0), which is inelastic.
Infinite (∞), which is exactly elastic
PED and Revenue: There is an exact numerical association in the middle of PED and an association
's revenue. There are three "sorts" of income:
1. Total revenue (TR) which can be calculated by multiplying price with the sold quantity (P x Q)
2. Average

Supply, Demand, and Price Elasticity Paper – Rice. ECO / 212: Principle of Economics Week 2
Learning Team Assignment With the growing cultural diversity in the San Francisco bay area, it is
hard not to notice the Asian cuisines and restaurants in every corner of the block. Asian food had
become a natural substitution choice for the American fast food; and rice, is the perfect substitution
for wheat and flour. Rice is the seed of the monocot plant "Oryza sativa". As a cereal grain, it is the
most important staple food for a large part of the world 's human population, especially in East and
South Asia, the Middle East, Latin America, and the West Indies. It is the grain with the second–
highest worldwide production after corn. In this ... Show more content on Helpwriting.net ...
Rice is considered to be a Griffin good. Griffin goods are inferior goods which have an upward
sloping demand curve. The income effect is greater than the substitution effect. Normally with
inferior goods, the income effect will cause the consumers to demand less of a good. The
substitution of rice as the cost decreases, are other foods which are not normally available to poor
consumers. If the cost of rise is lower, the consumer buys less and spends his or her additional
income on foods which are preferable but not as affordable (Hubbard, & O'Brien, 2010).
Insulin, however, would not show the same results as rice. Insulin, as a necessity, would keep the
same demand if the price lowered or increased. If the cost of insulin decreased then it is likely to see
an income effect for other goods purchased by diabetic consumers. The consumer would in a sense,
have an increase of income. If the cost of the insulin increased the consumer demand would still
remain the same but would need to decrease the demand for other goods. Next time when we go to
an Asian restaurant and decided to have a rice dish, stop for a second and think about these
questions; is the current world supply enough to fulfill the demand? Is the supply of grain and corn
affecting the current price? What will the price be if there are shortage of supply and surplus of
demand and how that would affect the

Elasticity: Supply and Demand and Price
Price elasticity is an important concept to understand when beginning and maintaining a business
that distributes goods or services. Elasticity is the economic concept that estimates when products
should be introduced to consumers, and how (provided that all other variables remain constant)
demand or supply will be affected by changes in the environment that affect price (Basic
Economics, 2007–2010). Depending on how the percentage demanded/supplied is affected by price
differentiation will determine whether or not a good or service is considerably elastic or inelastic,
providing a sound guideline for business owners. The higher the elasticity, the more the demand will
change if the price varies in the competitive market. Elasticity ... Show more content on
Helpwriting.net ...
If a price of a book increases by 10% and the quantity supplied increases by 20%, this means that
the price elasticity would be 2, meaning that price has little bearing on quantity supplied. Out of
these three products and services, the hotel room would be the least elastic, and the book would be
the most elastic. There are a number of factors that can impact the elasticity of a product. How
necessary an item is, how large or small the expenditure is, how long the product has been out and
the numbers of substitutes on the market are all components that will effect on how much demand
will change. A bridge toll will be inelastic, meaning the number of people wanting it will not
change, because it may be a necessity expense for travel, there may be few alternative routes, and it
may be just a few cents for each consumer (Basic Economics, 2007–2010). College tuitions are
more inelastic. Our society has deemed it necessary to have a degree. Regardless if tuition increases,
the demand will stay relatively the same. There are few alternatives to having a college degree and
therefore the market is more limited. Price fluctuation will not impact consumer demand
extensively, therefore it would be considered inelastic. A bridge toll can be considered inelastic

Essay On Price Elasticity Of Demand
INTRODUCTION: India is going through a telecom revolution, especially in the wireless telephony
segment. The adoption of mobile telephony remains unparalled in scope, as users from diverse
segments increasingly choose to exercise the option of personal mobility. On an average the user
base has been adding 4–5 million subscribers per month. The Mobile subscriber base is growing at a
scorching pace in India and it is the "fastest growing mobile market in the world". The Wireless
subscribers have reached to 261.07 million as on 31st March 2008. The penetration level of mobile
services is still below 30% in India, hence there is a huge potential for growth in this segment. But
the scenario is different in the other countries since ... Show more content on Helpwriting.net ...
Price in Rs. Quantity in Mill minutes 2.65 100 1.5 180 Relatively Elastic demand for mobile
services. Effect of Tax on mobile services: Mobile services are subject to indirect taxation imposed
by the government. Here we consider the effects of indirect taxes on a producers costs and the
importance of price elasticity of demand in determining the effects of a tax on market price and
quantity. As mobile services in India are relatively elastic, the service providers have to absorb the
tax imposed on them. The demand curve is drawn as price elastic. The mobile service provider must
absorb the majority of the tax himself. When demand is elastic, the effect of a tax is still to raise the
price – but we see a bigger fall in equilibrium quantity. Output has fallen from Q1 to Q2 due to a
contraction in demand. Comparison of Mobile services in India and US: In United States, the mobile
service market is relatively inelastic. Since the markets are already saturated, for any price change
there is little scope for any drastic changes in the demand for mobile services. (a) In United States
(b) In India Joint Demand: Joint demand says if the quantity demanded for one product increases the
demand for another product also increases. The Concept of joint

What do you understand by the own-price elasticity of...
What do you understand by the own–price elasticity of demand for a good?
1. (a) What do you understand by the own–price elasticity of demand for a good?
(b) Will a linear (straight line) demand curve have a constant own–price elasticity of demand?
Explain your answer.
(c) Following the terrorists attacks in the USA on 11 September, there was a marked fall in business
travel. In respomse, many hotels cut their prices to business travellers; for example the Hyatt Hotel
group offered discounts of up to 50 per cent off regular room rates. Under what circumstances
would this lead to increased revenue for these hotels?
Before we define the meaning of the own–price ... Show more content on Helpwriting.net ...
There are five different ranges of variance of price elasticity of demand and the first one occurs
when demand is elastic. This is happening when the value of the price of elasticity of demand is
positive and the percentage change in quantity is larger than the percentage change in price. This is
an indication of demand responding to the change of the price of a ceratin good. The second range
occurs when demand is inelastic. This happens when the
PED value is less than one and the percentage change in quantity demanded is smaller than the
percentage change in price. This shows that demand does not respond to the change of the price of a
good. The third range occurs when demand is unit elastic. This happens when the
PED is equal to one and the percentage of the change in quantity demanded is equal to the
percentage of the change in price. This indicates that demand remains the same whatever the price.
The fourth range happens when demand is perfectly elastic. When that occurs PED is equal to
infinity and a slight price change leads to an infinite demand of quantity. The fifth range is when
demand is perfectly inelastic and the value of PED equals zero. This occurs when the percentage
change in price equals zero. There are differentiations in those values of elasticity of demand
according to certain determinants which affect the price elasticity

Own-Price Elasticity Of Demand: Coco Cola
Summaries
Chapter 3 and 4
Submitted by:
XXX
Summary (chapter 3)
The demand, for a product or service, determines it worth. If the demand, for the product, will be
high, the price of the product will also be high. This is because demand and price are negatively
related (and depicted by negatively sloped demand curve). This also suggests that the increase in
price will decrease demand for the product and a decrease in the price, of product, will increase its
demand.
However, it is also essential for the economists to understand how demand and price relationship, in
terms of quantity, varies from product to product. When we systematically scrutinize different
products and services, it becomes apparent to us that the quantity demanded, ... Show more content
on Helpwriting.net ...
This is because high prices ensure higher revenues and all firms, companies or organizations, which
operate in corporate system, has only one core objective, generation and swelling of revenue.
As resources, which are used in the production, of product or service, are limited and have cost;
therefore, it is essential for the producer to determine it production. It is also to be recognized that
there are various types, of resources and different ratios, of these resources are used to produce
optimal quantity, as per budget restraints.
For any firm, operating in a competitive market or corporate realm, it is essential to have fair
understanding of operations; whether to continue operations or not. According to the studies, a firm
will continue to produce, as long it could cover its variable cost. If a firm can manage to cover it
variable cost, it would continue its operations. Firm would be forced to shut down its operations
when the variable costs increase; however, in the short run, fixed cost has no impact on the short–
run decisions. In addition, despite of shutdown, a firm cannot leave industry and it will continue to
pay fixed cost, for a certain time, on which it has agreed, before the start of

Price Elasticity of Demand of Three Drinks
Aims and Objectives
The main aim of this project is to: * To determine the demand of three (3) different drinks, Coca
Cola, Orchard and Sprite, as prices fluctuate. * To determine if the theory of price elasticity of
demand is applicable to the demand of Coca Cola, Orchard and Sprite. * To determine the Price
Elasticity of Demand of each of the three (3) different drinks; Coca Cola, Orchard and Sprite. * To
investigate how revenues change as the prices of Coca Cola, Orchard and Sprite change.
Methodology The class decided that the Price Elasticity of Demand for three drinks were to be
found. The three drinks were: Coca Cola, Orchard and Sprite. I then chose to investigate whether
price elasticity of demand is ... Show more content on Helpwriting.net ...
The data collected was placed into the following table which was used to plot the graph below it.
Table 1 showing the demand of Coca Cola at prices ranging from $3.00 to $6.00
Graph 1 showing the demand for Coca Cola as price changes
CALCULATING PRICE ELASTICITY OF DEMAND–COCA COLA
Calculating price elasticity of demand when the price of Coca Cola increases from the original of
$5.00 to $6.00 and the quantity demanded falls from 37 to 27.
–––––––––––––––––––––––––––––––––––––––––––––––––
PED=Percentage change in quantity demanded of the good Percentage change in price of the good
Percentage change in quantity demanded of Coca Cola =–1037×1001~ –27.03%
Percentage change in the price of Coca Cola = +15×1001= +20%
PED=–27.03%+20%~ –1.35
PED= –1.35, this is greater than 1, therefore PED is elastic
Calculating price elasticity of demand when the price of Coca Cola decreases from the original of
$5.00 to $4.00 and the quantity demanded rises from 37 to 54.
–––––––––––––––––––––––––––––––––––––––––––––––––
PED=Percentage change in quantity demanded of the good Percentage change in price of the good
Percentage change in quantity demanded of

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