Analysis Simulation On Elasticity And Demand

Analysis Simulation on Elasticity and Demand
Analyzing Elasticity of Demand Simulation
DigiVal & DigiVal Plus Manufacturing Company sells a range of computers, notebook computers, desktop computers, high
–end servers and has a
market share of 22 percent, along with another office in the U.K. with sales in Europe at 30 percent total sales. There are three team members who are
qualified to get the companies market back on track. CEO, B.J. Downey, who targets the strategies, goals and revenue targets has steered DigiVal for
the past 12 years. George Hernandez, Group Economist, who handles the analysis of economic trends in the market, Linda Jacobs, Product Manager,
contributed vision and strategies within the company and Brent Richardson, Product Manager, that has a strong background ... Show more content on
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They would find gas station with a cheaper price. If the station lowered the amount of gasoline by 10% or 15%, there would be a line wrapped
around the corner of that gas station. People would go out of their way to buy cheap gas.
Total receipts and total revenue are determined by multiplying the price of the gas by the quantity sold. If the demand for a product is elastic, the
amount consumer 's buy will go up and the price will be lowered, but if inelastic, a lower price would mean a small increase in the quantity demanded.
It would not be enough if sales increased.
Substitutes and Compliments
Gas cannot be substituted. For food, which is a good, can be substituted. If the price of fish and butter go up, buyers can switch to chicken and
margarine. Small changes in the price of a product will cause people to switch from one product to the other. When quantity like this sells in a particular
store or small store, the quantity changes drastically by the impact of store receipts, which tends to make the demand elastic. The more changes in
substitutes the more elastic it becomes, the less substitutes for that particular product, the more inelastic the demand becomes.
References:
Colander: Economics, Fifth Edition, Microeconomics II, Describing Supply and Demand: Elasticity 's
Gary E.
... Get more on HelpWriting.net ...

Economics Elasticity Essay
Businesses know that they face demand curves, but rarely do they know what these curves look like. Yet sometimes a business needs to have a
good idea of what part of a demand curve looks like if it is to make good decisions. If Rick's Pizza raises its prices by ten percent, what will happen to
its revenues? The answer depends on how consumers will respond. Will they cut back purchases a little or a lot? This question of how responsive
consumers are to price changes involves the economic concept of elasticity.
Elasticity is a measure of responsiveness. Two words are important here. The word "measure" means that elasticity results are reported as numbers, or
elasticity coefficients. The word "responsiveness" means that there is ... Show more content on Helpwriting.net ...
When it is greater than one, economists say that demand is elastic.
Products which have few good substitutes generally have a lower elasticity of demand than products with many substitutes. As a result, more
broadly–defined products have a lower elasticity than narrowly defined products. The price elasticity of demand for meat will be lower than the price
elasticity of pork, and the price elasticity for soft drinks will be less elastic than the price elasticity for colas, which in turn will be less elastic than the
price elasticity for
Pepsi.
Time plays an important role in determining both consumer and producer responsiveness for many items. The longer people have to make
adjustments, the more adjustments they will make. When the price of gasoline rose rapidly in the late 1970s as a result of the OPEC cartel, the only
adjustment consumers could initially make was to drive less. With time they could also move closer to work or find jobs closer to home, and switch to
more fuel–efficient cars.
The concept of elasticity can help explain some situations that at first glance may seem puzzling. If American farmers all have excellent harvests,
they may have a very poor year financially. They may be better off if they all have mediocre harvests. If a bus company decides it needs more
revenue and tries to get it by raising fares, its revenues may decrease rather than increase.
Inelastic Demand

Worksheet Elasticity Answer 1
Chapter 5 Elasticity and Its Application
Multiple Choice
Table 5–2
Price
Quantity
$100
0
$80
10
$60
20
$40
30
$20
40
$0
50 102.Refer to Table 5–2. Using the midpoint method, if the price falls from $80 to $60, the absolute value of the price elasticity of demand is
a.
20.
b.
10.
c.
2.33.
d.
0.43.
ANS:CPTS:1DIF:2REF:5–1
NAT:AnalyticLOC:ElasticityTOP:Midpoint method | Price elasticity of demand

MSC:Analytical 103.Refer to Table 5–2. Using the midpoint method, if the price falls from $60 to $40, the absolute value of the price elasticity of
demand is
a.
0.4.
b.
1.
c.
4.
d.
20.
ANS:BPTS:1DIF:2REF:5–1
NAT:AnalyticLOC:ElasticityTOP:Midpoint method | Price elasticity of demand
MSC:Analytical 104.Refer to Table... Show more content on Helpwriting.net ...
d.
0.67, and an increase in price will result in a decrease in total revenue for good A.
ANS:CPTS:1DIF:2REF:5–1
NAT:AnalyticLOC:Elasticity
TOP:Midpoint method | Total revenue | Price elasticity of demand
MSC:Analytical 148.Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per
week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about
a.
1.43, and an increase in the price will cause hotels' total revenue to decrease.
b.
1.43, and an increase in the price will cause hotels' total revenue to increase.
c.
0.70, and an increase in the price will cause hotels' total revenue to decrease.
d.
0.70, and an increase in the price will cause hotels' total revenue to increase.
ANS:APTS:1DIF:2REF:5–1
NAT:AnalyticLOC:Elasticity
TOP:Midpoint method | Total revenue | Price elasticity of demand
MSC:Applicative 149.When the local used bookstore prices economics books at $15 each, it generally sells 70 books per month. If it lowers the
price to $7, sales increase to 90 books per month. Given this information, we know that the price elasticity of demand for economics books is about
a.
2.91, and an increase in price from $7 to $15 results in an increase in total revenue.

b.
2.91, and an increase in price from $7 to $15 results in a decrease in total revenue.
c.
0.34, and an

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

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.

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 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 ... Show more content on Helpwriting.net ...
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

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

Elasticity of Demand
chapter four
Elasticity of Demand and Supply
CHAPTER OVERVIEW
This is the second chapter in Part Two, "Price, Quantity, and Efficiency." Both the elasticity coefficient and the total revenue test for measuring price
elasticity of demand are presented in the chapter. The text attempts to sharpen students' ability to estimate price elasticity by discussing its major
determinants. The chapter reviews a number of applications and presents empirical estimates for a variety of products. Income elasticities of demand,
and price elasticity of supply are also addressed.
INSTRUCTIONAL OBJECTIVES
After completing this chapter, students should be able to:
1. Define price elasticity of demand and compute the coefficient of ... Show more content on Helpwriting.net ...
Absolute changes depend on choice of units. For example, a change in the price of a $10,000 car by $1 and is very different than a change in the
price a of $1 can of beer by $1. The auto's price is rising by a fraction of a percent while the beer rice is rising 100 percent. b.Percentages also make it
possible to compare elasticities of demand for different products. 5.The midpoint formula for elasticity is: Ed = [(change in Q)/(sum of Q's/2)] divided
by [(change in P)/(sum of P's/2)] a.Have the students calculate each of the percentage changes separately to determine whether the demand is elastic or
inelastic. After the students have determined the type of elasticity, then have them insert the percentage changes into the formula. b.Students should
practice this using numbers you provide, or using the table in end–of–chapter question 4–2. 6.Because of the inverse relationship between price and
quantity demanded, the actual elasticity of demand will be a negative number. However, we ignore the minus sign and use absolute value of both
percentage changes. D.Interpretations of Ed 1.If the coefficient of elasticity of demand is a number greater than one, we say demand is elastic; if the
coefficient is less than one, we say demand is inelastic. In other words, the quantity demanded is "relatively responsive" when Ed is greater than 1 and
"relatively unresponsive" when Ed is less

How Does Elasticity Affect The Airline Industry
Elasticity is a term that describes how much the demand or supply for a product or service changes in relation to that product's price. Every product
on the market today has an alternate level of elasticity. Products considered necessities by a majority of consumers are typically less affected by price
changes, causing them less elastic. In other word, if the product is not considered essential for the consumers they are likely to buy less when the price
increased, making that product elastic.
The two markets I choose to discuss are Airline Industry which will be characterized as an elastic demand and Pharmaceutical Companies (Insulin)
which will be characterized by an inelastic demand.
Elastic demand means that demand for a product is sensitive to price changes. For example, if the market value of a product increased, there will be
fewer units sold. If the market value of a product decreases, there will be an increase in the quantity of units sold. Elastic demand is also referred to as
"the price elasticity of demand". ... Show more content on Helpwriting.net ...
The elasticity of demand is based purely on current market condition. The tragedy that happened on September 11th had a huge negative effect in the
travel industry. It did not only create a disaster but it also affected the fiscal and monetary policies,supply and demand, and it causes staffing problems
nationwide. The airline industry is being looked at as unstable due to the current market conditions. The market constantly changes, the purpose of
travel has a possibility to change, there is also other transportation available such as bus, car, train, ferry etc. Externalities keep on influencing the
elasticity of

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 & 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 priceelasticity.
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

Elasticity Of Demand And Supply
Contents
Introduction2
Elasticity: –2
Elasticity of Demand2
Elasticity of Supply4
Elastic and Inelastic Supply:5
Conclusion:6
References:6
Introduction
Elasticity: – In Economics, how responsive an economic variable is to a change in another is the measurement of elasticity. It is a unit free measure.
By using Elasticities, we can measure the two markets of price and quantity. The difference among markets can be quantified by the economist using
elasticities without the measurement of the units. It is the responsiveness of demand or supply to a change in another (e.g. cost). This idea is basic to
appreciating how advertises function. The most widely recognized versatilities utilized incorporate value flexibility of interest, value flexibility of
supply, cross–value flexibility of interest and pay flexibility of interest. One of the important notion in economics is Elasticity. It is useful in
understanding the concepts of consumer choice, Taxation and producer surplus.
The Equation of Elasticity is = % of change in quantity / % of change in price.
According to the article in Harvard Business Review on Elasticity of Demand is also referred to as Price Elasticity of Demand in Economic measures is
based on the effect of how the quantity demanded is changed when there is

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

Gas Price Elasticity Essay examples
Gas Price Elasticity
The Energy Information Administration of the Department of Energy began tracking weekly gasoline prices in 1990 by means of a survey of 800
service stations around the country. The average retail price for unleaded gasoline posted its fourth record high during the week of June 12, 2000,
increasing 5 cents a gallon to an average of $1.681. The price at the pump is higher than the same period last year by 56 cents and has risen 16.2 cents
over the past month (Anonymous, 2000).
How far will it rise? What will consumers do about the dramatic increases that are occurring with the arrival of each shipment? Price elasticity of
demand would indicate that demand will fall as prices continue to rise, which in turn should result ... Show more content on Helpwriting.net ...
The oil producing nations in the Mideast currently are meeting to discuss increasing production so that crude prices will decline from its current price
of more than $30 a barrel to the region of $25 (Georgy, 2000).
The American Petroleum Institute reports that 32.6 percent of the final cost to the consumer is the refiner's share that covers the cost of refining and
provides the oil companies with their profit (Brodrick, 2000a). The government's share is greater, however. "Taxes account for 37.4 percent of
gasoline costs and averaged 41.5 cents per gallon in 1999, according to the institute. The federal government's share is 18.4 cents, and the state takes
about 23 cents. Occasionally, local municipalities tack on an extra tax" (Brodrick, 2000a; p. 000215b).
The price is further affected by locale. The Midwest typically is one of the highest–priced regions in the nation because it is the most difficult section
for transportation. Distance from refineries is prohibitive, and refineries are saying that the current high prices in the region have resulted from
problems with using a pipeline that eases transportation costs.
The retailer's price increase to the final consumer is between 4 and 8 cents a gallon, meaning that there is little option for the consumer to shop on
price. Further, consolidation has been active in oil as in other industries. A different brand name does not signify that the gasoline is being sold by

Essay On Supply Demand And Price Elasticity
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

Elasticity Of Demand And Supply
INTRODUCTION:
Elasticity :– In Economics, how responsive an economic variable is to a change in another is the measurement of elasticity. It is an unit free measure.
By using Elasticities, we can measure the two markets of price and quantity. The difference among markets can be quantified by the economist using
elasticities without the measurement of the units. It is the responsiveness of one variable (demand or supply) to a change in another (e.g. cost). This
idea is basic to appreciating how advertises function. The most widely recognized versatilities utilized incorporate value flexibility of interest, value
flexibility of supply, cross–value flexibility of interest and pay flexibility of interest.
The Equation of Elasticity is = % of change in quantity / % of change in price.
Elasticity of Demand :
Elasticity of Demand also referred to as Price Elasticity of Demand in Economic measures is based on the effect of how the quantity demanded is
changed when there is change in the price.With respect to price it is the quantity demanded responsiveness degree. For example lets consider a case
in the below figure, where there is elastic demand when the curve is almost flat. You can see that, the quantity decreases a lot if there is a change in
price from $.75 to $1. There can be many reasons for this On the off chance that demand is extremely inelastic, then vast changes in cost won 't do
particularly to the amount requested. For example,

The Elasticity Of Imports From Asian Countries
Price Elasticities in Asia Bruce Cadwallader, Kelsey Seeds, Mary Taylor, Gloria Tolson Ohio Dominican University MBA640 The Issue The issue
at hand is the elasticity of imports and exports in Asian countries and why the import and export demand elasticities are not constant as one would
think. Import and export demand can change the price and income variables of a country. The study found that in Asian countries, if imports are
price inelastic there will be a rise in import prices and will lead to an increase in the import bill. If imports of these countries are income elastic, an
increase in incomes will lead to a more proportionate increase in imports. If exports from Asian countries are price inelastic, export earnings will rise
as the prices increase. If exports from these countries are income elastic, an increase in incomes worldwide will lease to a greater than proportionate
increase in exports (Keat, Young & Erfle, 2013). The study consisted of five different Asian countries, India, Japan, Philippines, Sri Lanka, and
Thailand. It was found that all five countries had inelastice price and income elasticities on import demand. Whereas, three of the five countries were
price elastic on export demand, but only Japan was income elastic on export demand (Sinha, 2001). Table 1 Price Elasticities in Asia CountryImports
PriceImports IncomeExports PriceExports Income India–0.51–0.11–0.550.45 Japan–0.910.84–0.802.84 Philippines–0.170.57

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 withPrice 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

Price Strategy And Estimate Of Price Elasticity
Price Strategy and Estimate of Price Elasticity Now looking at the three marketplaces that we have chosen to explore for our product, we conclude that
in terms of consumer behavior, buying habits, values and concerns, these three marketplaces are totally different from each other. It is very evident that
each region requires a separate pricing strategy and so that is what we are going to follow in this global plan of our company. Another factor that we
need to keep in mind is the cultural and economic realities of these marketplaces and consumers while pricing our products. Let us begin with the
pricing for the European Union market Spain. This is a rich market which is centered around good quality and ready to spend the money asked for ...
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Similarly, if the price is low the demand shoots up dramatically. We as a confectionary company needs to take advantage of this consumer behavior
and economic reality in China and among the people of China. Keeping these realities in mind, it is very much obvious that for this market, we
choose and follow a value based pricing and do not keep the price of the product too high. It is advisable rather to follow an average pricing and let
the consumers build some enthusiasm around the product. Once the consumers like the product and realizes it is good quality, then they accept the
product and the low pricing help the product create some buzz in the market and have some good techniques. Similarly, for Latin America it has been
interesting to find out that the people in this region are focused on value yet they do not mind paying the appropriate price for a product if they know
it is good. The price elasticity of demand of people in this region is just moderate which is good for our product. Thus, we will follow a moderate
pricing strategy in this respect to ensure the best possible results from the consumer in this market to ensure that product gets successful in this new
market.
Part D: Manufacturing/Operation/Supply Chain We are all aware about the importance of supply, manufacturing and operations chain for any business.
It becomes even more important if we are crossing the borders and entering international marketplaces as we are

Relationship Between the Price Elasticity of Demand and...
Explain the relationship between the price elasticity of demand and total revenue. What are the impacts of various forms of elasticities (elastic,
inelastic, unit elastic, etc.) on business decisions and strategies to maximize profit? Explain using empirical examples.
The consumers and producers behave differently. To explain their behavior better economists introduced the concepts ofsupply and demand. In short
words, the law of demand states that with price increase quantity demanded of a good or services decreases, and the law of supply states that
quantity of a good produced increase if the market price of that good increases. Of course, it is just general rule and does not explain all varieties of
factors impacting the supply and ... Show more content on Helpwriting.net ...
If the price in your shop will be higher than competitive one the low–income customers will skip the trip to it which will lead to decrease in profit.
* Temporary price change.
Temporary price change can affect revenue significantly. One–day sale will increase quantity of sold product and the volume of sold goods will
outweigh the price drop which will lead to revenue increase.
In order to set right price, company should take into consideration the above mentioned factors as well as characteristic of demands such as elastic or
inelastic.
If the demand for the good or services of the company is elastic then the change in quantity demanded would be greater than a change in price. Let's
say the 10 percent decrease in price will cause increase in demand for 20 percent. The effect of this changes is that customers buying more products
of this company. They are buying it for lower price but the price decrease outweigh by increasing quantity of the products or services. In this case the
company benefits from these changes by raising profits. On the other hand, if company would raise the prices for the product the quantity will decrease
so does the profit.
If the demand for companies output is inelastic then the change in price will have a smaller effect on change of quantity. Let's say company will cut
the price for 10 percent. This will cause the increase in demands for 5

In this paper, we examine Happy Pet Clinic, a local veterinary clinic, and how the principles of elasticity of demand might frame its pricing decisions
and planning. As a small practice, every change the managers make can have a significant impact on the clinic 's income. Price Elasticity of Demand,
Cross Price Elasticity of Demand, and Income Elasticity of Demand concepts can be used to analyze and estimate how prices changes may affect the
clinic 's bottom line Professional Vet Brand pet food is the exclusive brand of pet food carried at the Happy Pet Clinic. This pet food is considered a
В‘premium ' brand and competes with other high–end pet foods but is available only at veterinary offices. The recent recall in over 100 brands of pet ...
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Income Elasticity of Demand deals with the responsiveness of the quantity demanded of a good when the income of the consumer increases. It
measures whether a good is a normal or an inferior good. "A product is a normal good when its income elasticity is positive, meaning that higher
income causes people to purchase more of the product. For an inferior good, income elasticity is negative because an increase in income causes
people to buy less of the product" (Kane, 2007). At Happy Pet Clinic, they want to calculate the income elasticity of their clients willing to do a
"Wellness" panel of blood work on their pet if their clients have an increase in income. The elasticity (E) can be calculated in this way: Ei= % change
in the quantity demanded, divided by the % change in income.
Therefore, if income elasticity is 1.5, an increase in income by 7% will lead to a 10.5% rise in clients willing to do a Wellness panel blood work on
their pet by. This tells us that a wellness panel of blood work is both a normal and a luxury good: A normal good has an income elasticity > 0. An
inferior good has an income elasticity < 0 A luxury good has an income elasticity > 1. A necessary good has an

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

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.
Price Elasticity of Demand
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
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

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

How Elasticity Is Important For Economics And It Is A...
Elasticity is one of the most important theories in economics and it is a measure of responsiveness. There are for the most part two sorts of elasticity,
the flexibility of interest which incorporates value versatility of interest, salary flexibility of interest, and cross versatility of interest and additionally
versatility of supply the extent to which an interest or supply bend responds to an adjustment in cost is the bend 's flexibility. Elasticity changes among
items since a few items might be more fundamental to the purchaser.
Value elasticity assumes a vital part in the lives of customers. The value flexibility of interest is the affectability of the interest at an item when its
cost changes. Bistros like Panera Bread rejects installments from clients and courteously requested that they rather "take what you need, and leave
what 's coming to you" , bringing about more individuals getting merchandise like sustenance at a reasonable value that they are willing to pay.
Taking into account the salary versatility of interest, customers can show signs of improvement and more beneficial life as they will purchase things
with better quality as their wage rises. Individuals will go to Italianizes for pizza and not to Pizza Hut as Italianizes offers a superior, more delicious,
more advantageous and more extensive assortment of decisions, notwithstanding when it is more costly. With cross flexibility of interest, buyers can
get the same quality item at a less expensive cost as

Ford Motor Company Elasticity/Consumer Behavior and Market...
Consumer behavior or elasticity is a consumer's response to a change in price of a good or service. Consumer behavior allows a consumer to rank and
prioritize purchases according to their elasticity of certain goods and their dependence on others (Managerial Economics, 2010). When consumers
recognize a change in price and respond strongly, they can adjust their consumption and therefore have their demand for that item become elastic.
Automobiles tend to have elasticity in them in regards to make, model, and features that the consumer is willing to pay for. Basic models and good
fuel mileage become important as income goes down and elasticity for automobiles goes up. Merriam–Webster defines competition in business as "the
effort of two or ... Show more content on Helpwriting.net ...
Ford has improved overall quality and enhanced their brand reputation/recognition. In a 2011 Consumer Reports Survey, Ford scored 144 points, taking
2nd to Toyota with 147 points, which analysts call a "dead heat" score. The survey was based on "safety, quality, value, performance, design/style,
technology/innovation, and environmentally friendly/green" (Associated Press 2011). Ford is on the right track and is gaining customer loyalty while
increasing market share, which is a winning economic equation.
In addition to their green initiatives, Ford is looking at other trends regarding consumer elasticity and behavior towards the automobile market. In
addition to dealing with the shift in consumer short–term behavior (going from "I really want" to "I do not really need"), the automotive industry, along
with all others are wondering what the long–term change will be in consumer behavior due to the recent recession. According to Barkley US, there will
be significant long–term changes in consumer behavior. Most notably, the changes will be the consumer going back to a basics mentality, the use of
technology and green strategy, and women influencing more purchase decisions. The biggest changes will take place in America and parts of Europe,
where housing and stock market bubbles have imploded and unemployment has soared. Companies will also need to show they empathize with
consumers' new concerns. "There will need to be a move from passion to compassion in

Gas Price Elasticity Essay
Gas Price Elasticity
The Energy Information Administration of the Department of Energy began tracking weekly gasoline prices in 1990 by means of a survey of 800
service stations around the country. The average retail price for unleaded gasoline posted its fourth record high during the week of June 12, 2000,
increasing 5 cents a gallon to an average of $1.681. The price at the pump is higher than the same period last year by 56 cents and has risen 16.2 cents
over the past month (Anonymous, 2000).
How far will it rise? What will consumers do about the dramatic increases that are occurring with the arrival of each shipment? Price elasticity of
demand would indicate that demand will fall as prices continue to rise, which in turn should ... Show more content on Helpwriting.net ...
The end result is that there is little price competition at retail (Brodrick, 2000a).
Price increases are normal in the summer months as families pile into cars for the family vacation. This year, there was additional price pressures as
the industry recovered from the hard winter in the Northeast and Asia continues to recover from it currency crisis–induced recession. As people in
affected regions have more discretionary income, they spend greater portions of it on gasoline for their own cars (Brodrick, 2000).
William Berman is editor of Pump Price Report in Fairfax, Va., and retired energy director for the AAA, and says that consumers get "nervous" as
gas prices rise. Conventional wisdom is that families indulge in "fewer weekend getaways and long driving vacations with the family" (Brodrick,
2000; p. 000215d), but there is evidence that such is not the case. Rather, Americans generally will not change travel plans unless gas is over $1.50 a
gallon, which of course it is now (Brodrick, 2000).
Even then, relatively few cancel travel plans. Unless there is a gas shortage so that availability is uncertain, Americans generally continue with their
plans regardless of price.
Gasoline generally is seen as a necessity. Going to a family reunion once a year may be an option, but going to work each day is not. There is also no
option for landscaping businesses and farmers to defer purchase in response to price. Higher prices encourage conservation, but

Demand, Supply, Market Equilibrium and Elasticity
Demand, Supply, Market Equilibrium and Elasticity A. Elasticity of demand is shown when the demands for a service or goods vary according to the
price. Cross–price elasticity is shown by a change in the demand for an item relative to the change in the price of another. For substitutes, when there
is a price increase of an item, there is an increase in the demand for another item. When viewing complements, if there is an increase in the price of an
item, the demand for another item decreases. Income elasticity is shown when there is a change in the demand for a good relative to a change in
income. This concept is shown in how people will change their spending habits when their income levels change. For... Show more content on
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E. An example of availability of substitutes is bottled water. Because there are so many brands of bottled water on the market, it makes it very
easy for consumers to switch to another brand if the price changes on the brand they normally purchase. With the many brands available, the
demand for this certain brand would surely decrease, decreasing revenue for the company. An example of share of consumer income devoted to a
good is sugar versus a 20 lb. bag of Pedigree dog food. If the price on these items were increased by 15%, consumers would notice the price on the
dog food before the sugar. Normally, the dog food costs approximately $15 and the bag of sugar normally costs $3. The dog food's price would
increase to $17.25, while the bag of sugar would only cost $3.45. Consumers would still purchase the sugar and would have no impact on the
demand; however, consumers may begin looking for substitutes for the dog food, which will begin decreasing the company's revenue. An example
of consumers' time horizon is when stopping to the local convenience store to purchase gas for the vehicle. Normally, the price of gas only fluctuates
$0.02 to $0.03/gallon on any given day. If, one day, the store decides to increase the price of gas by $0.15/gallon, there will, more than likely, not be
any fluctuations on the demand initially because consumers normally go to this store to purchase gas and don't really think about how much the gas
costs or are running late or the

Elasticity Of Demand For Parking Lot Space
Here elasticity of demand for parking lot space is –2, price is $8 per day, marginal cost MC is zero and capacity is 80%
We know that MR > MC means that (P–MC)/P>1/|e|
(P–MC)/P is the current margin of price over marginal cost = (8–0)/8 = 1
1/|e| is the desired margin = 1/|–2| = ВЅ
Here (P–MC)/P>1/|e|, (1>1/2), that means MR > MC, if MR>MC reduce price
For optimizing, we need to reduce price here in order to increase demand and increase capacity.
If we increase the demand by reducing elasticity demand from –2 to –3
Here price elasticity of demand is –3, Q1 is 80%, Q2 is 100%, P1 is $8 and we need to find reduced price P2 –3= [(80–100)/(80+100)]/[(8–P2)/(8+P2)]
[(–24+3P2)/(–24–3P2)] = [(80–100)/ (80+100)] [(–24+3P2)/(–24–3P2)] = [–20/ (180)] 180*(–24+3P2) = –20*(–24–3P2) –4320+540P2 = 480+60P2
P2 = $10 but if we try to find the reduced price here using price elasticity estimator formula, for that we need to consider (P–MC)/P=1/|e|, that means
price elasticity of demand is –1.
Price elasticity of demand =[(Q1–Q2)/(Q1+Q2)]/[(P1–P2)/(P1+P2)]
Here price elasticity of demand is –1, Q1 is 80%, Q2 is 100%, P1 is $8 and we need to find reduced price P2 –1=

Price Elasticity of Supply
Price Elasticity of Supply * Price Elasticity of Supply: * The degree of price elasticity of supply depends on how easily – and therefore quickly –
producers can shift resources between alternative uses. Unlike PED, there is no Total Revenue Test for Price Elasticity of Supply. * Because there is a
direct relationship between Price & Total revenue, they always move together.
DETERMINANT OF PRICE ELASTICITY OF SUPPLY: TIME!
THREE PERIODS: Market period––> short run ––> long run * Price Elasticity of Supply: the Market Period: The period that occurs when the time
immediately after a change in market price is too short for producers to respond with a change in quantity supplied. * Suppliers cannot be picky ... Show
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Decrease| Decrease| Indeterminate| Decrease|
The Price–Elasticity Coefficient and Formula: * Price elasticity of demand = consumers' responsiveness/sensitivity to a product's price change * A
product is elastic if a small change in its price elicits very large changes in the quantity demanded. * * Movement on the demand curve ex. products
that are not required in people's daily lives are often elastic products. (not necessity but luxury) * A product is inelastic if a big price change elicits
very little influence on the quantity demanded. * Minimal movement on the demand curve * ex. products that are required in people's daily lives are
often inelastic products. (not luxury but necessity)
It is important to keep in mind that elasticity involves percentage change in price and quantity demanded; not absolute change.
Midpoint Formula for calculating elasticity: * We use the formula in computing the price–elasticity coefficient. * Ex: A change of $4–$5 along a
demand curve is a 25% increase, but the opposite price change from $5–$4 along the same curve is a 20% decrease. Since elasticity should be the same
whether price rises or falls, the midpoint formula is needed. * This formula simply averages the two prices and the two quantities as the reference
points for computing the percentages. * Ex: the reference point for the

The Strengths Of Elasticity
Elasticity can measures the strength of your response to a change in a variable. In business and economics, elasticity refers to the extent to which
an individual, a consumer, or a producer changes his or her demand or supply in response to changes in price or income. It is primarily used to
assess changes in consumer demand as a result of changes in the price of goods or services. Elasticity=(% change in quantity)/(% change in price)
Elasticity is an economic concept that measures the change in the total demand for service or good and the price movements of that service or good.
The product is considered to be resilient if the quantity demand for the product changes drastically as its price increases or decreases. Conversely, if
the quantity demand for a product changes little when its price fluctuates, the product is considered to be inelastic. Insulin as an example, it consider a
highly inelastic product. The need for... Show more content on Helpwriting.net ...
This is called the midpoint method of elasticity. The advantage of the midpoint method is that the same elasticity is obtained between the two price
points, whether the price rises or falls. This is because the formula uses the same cardinality for both cases and below is the equation; % change in
quantity= (Q_2–Q_1)/(гЂ–(QгЂ—_2+Q_1)/2)Г—100 % change in price= (P_2–P_1)/(гЂ–(PгЂ—_2+P_1)/2)Г—100 First, apply the formula to
calculate the elasticity as price decreases from $70 to $60. 2Г—100 Г—100 =6.9 2Г—100 Г—100

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:
В•Test markets
В•Analysis of historical sales data
В•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

Classification of Price Elasticity of Demand
Classification of Price Elasticity of Demand 1. Price Elastic Demand (% О”Qd > % О”P) Пµ > 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 (% О”Qd = % О”P) Пµ < 1 If the value of elasticity

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
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 purpose of this essay is to define elasticity of demand, cross–price elasticity, income elasticity, and explain the elastic coefficients for each. I will
explain the contrast of and significance of difference between the three. I will also explain whether demand would tend to be more or less elastic for
availability of substitutes, share of consumer income devoted to a good, and consumer's time horizon, and give examples of each. Then, I will explain
the logical impacts to business decision making that result from each. Last, I will differentiate between perfectly inelastic demand and perfectly
inelastic demand, and illustrate the difference between the terms. Elasticity of demand, also known as price demand elasticity, is defined as... Show
more content on Helpwriting.net ...
The coefficient for elasticity of demand measures the relationship between two variables. A formula for figuring out the coefficient of elasticity of
demand is: (percentage change in quantity) / (percentage change in price). The coefficient will be the percentage change in quantity demanded in
response to a one percent change in price, and will determine is if the demand for a good is elastic (eod>1) or inelastic (eod<1). Knowing the
coefficient for the demand of a product gives a business the edge because they will know when to make adjustments to price in order to increase the
demand for a product. Cross–price elasticity, Income elasticity, and Elasticity of demand all have different coefficient formulas. The difference between
cross–price elasticity and income elasticity is that cross–price elasticity measure the percentage of change in demand of a product in relation to change
in price, while income elasticity measures changes in demand in relation to changes in income. The difference between these two and elasticity of
demand is that elasticity of demand measures the responsiveness of demand to a change in price. Elasticity of demand determines whether a company
can increase or reduce their price on a product, and is therefore detrimental to a company that is trying to maximize their profits. Cross–price

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
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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

Economics: Price Elasticities
1a)
Price elasticity of demand (PED) measures the degree of responsiveness of the quantity demanded of a good to a given change in price of the good
itself, ceteris paribus. It is found by taking the percentage change in quantity demanded of good X divided by the percentage change in the price of
good X.
The numerical value of the price elasticity of demand is always negative due to the inverse relationship between quantity demanded and price as stated
in the law of demand. When we interpret the value of the price elasticity of demand, we just quote the absolute value. The absolute value of PED range
from zero to infinity.
When PED is greater than one, the demand for the good is said to be price elastic. It means that a ... Show more content on Helpwriting.net ...
If the YED is between zero and one, it means that the good is a basic necessity and is income inelastic which implies that a proportionate change in
income causes a less than proportionate change in the demand for the good. And example will be staple food such as rice.
A negative YED implies that increases in income will lead a decrease in the demand for these goods called inferior goods. Thus inferior goods have
negative YED and an example of an inferior good is walkmans.
There are many factors that affect the YED of a product. Firstly, the degree of necessity of the good. The higher the degree of necessity, the lower
the magnitude of YED such as basic goods like staple food. A change in level of income will not cause a significant change in the demand of staple
food. Whereas luxury goods such as posh restaurant meals will have a higher YED. However, in different places, people will view the necessity of the
good differently. For example a necessity product in a developed country maybe a luxury product in developing countries due to different stages of
economic development.
Secondly, the rate of satisfaction for the good as the consumption increases. When a consumer quickly become satisfied from consuming the product,
the less their demand will expand as income increases for example food such as beef. Thus the demand for the good will be

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

Analysis Simulation On Elasticity And Demand

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Analysis Simulation On Elasticity And Demand