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Microeconomics focuses on the demand and supply of a single product. It studies the behaviour of a particular institute in the market, helping in the management of that institute. It helps in answering various questions such as what type of a product is to be produced; how much of that product is to be produced to meet the market demands; how is it going to be produced; what raw materials are going to be used; what type of fuel would be used; for whom the good is to be produced; and many other such questions are answered via microeconomics. So all the choices a particular person makes comes under microeconomics because he is just concerned with what he is producing rather than the total production of a particular good in an economy. Macroeconomic issues are related to the balance between aggregate supply and aggregate demand. If the aggregate demand gets much higher than aggregate supply, inflation and balance of payment deficit (exports become greater than imports) can take place. On the other hand, if the aggregate demand gets lower than aggregate supply, recession and unemployment may occur. So it is crucial to maintain the balance between aggregate supply and aggregate demand and macroeconomics helps in doing so. ...
Task 2: The Price Elasticity of Demand (PED) measures how much the quantity demanded of a commodity responds to a change in price of that commodity. Price Elasticity of Demand can be calculated by using the following formula: Price elasticity of demand = Percentage change in quantity demanded / Percentage change in price For example, if there is a 40% rise in oil price and the demand for oil decrease by 10% then Price Elasticity of Demand will be -10% / 40% = -0.25. The value of PED is always negative, because demand graphs are mostly downward slopping, meaning that price and demand always go opposite. An increase in price will result in a decrease in demand and vice versa. Thus there will always be a negative figure which would make the sign negative. If the quantity demanded responds substantially to the changes in price, the demand for that good is said to be elastic. On the other hand, if the quantity demanded responds slightly to changes in prices, the demand for that good is said to be inelastic. PED helps us in determining whether a good has elastic or inelastic demand. Ignoring the negative sign, if PED is greater than 1 then the demand will be elastic and if PED is less than 1 then the demand will be inelastic. Consider the example of oil. A rise in the price of oil may result in a slight decrease in the demand of oil. The vehicles will continue to use oil, so people would have to pay higher prices. The slight decrease in demand may occur because some people might shift to bicycling. In this case the demand for oil is inelastic. Goods which are classified as necessities have inelastic demand. A patient would have to buy a life saving drug how much expensive it might be
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“The Difference Between Macro and Micro Economics & Price Elasticity of Essay”, n.d. https://studentshare.org/macro-microeconomics/1430423-the-difference-between-macro-and-micro-economics.
This paper aims to: explain what action a profit-maximizing firm takes if marginal revenue is less than marginal cost; define the following three terms
(elasticity of Demand; cross-Price Elasticity; income Elasticity) explains the elasticity coefficient for each of three terms.
The author states that income elasticity of demand can be defined as the measure, connection or relationship between Δ in quantity demanded goody and Δ in actual income. Cross Price Elasticity (CPE) is the rate at which quantity of one good response as a result of Δ in the price of another commodity z.
If the demand for corn increases due to its use as an alternative energy source, there will be a decrease in the supply of corn's substitute such as soybean. This is because change in the price of related goods is a determinant of demand (McConnell & Brue, 2002).
Individuals would not buy the product as they used to and the quantity demanded will fall whilst the firms would supply more of the product i.e. the supply curve will move to the right. In the case above, if the demand for corn increases, there would be a shift in the demand curve to the right.
One of the major concepts of microeconomics is price elasticity of demand, which refers to sensitivity levels of demand for a given product or service to changes in its price. The elasticity of demand co-efficiency is the percentage change in the quantity of a product or frequency of a service in reference to percentage variation in price.
This report is divided into two sections; the first section of the report discusses important terminologies such as Price elasticity of demand, Cross elasticity of demand, Income elasticity of demand and Price elasticity of supply. The other section of the report discusses about the actions that the government can take in order to reduce the fluctuations of commodity prices.
A certain good in the market can obtain several forms of demand elasticity - elastic, inelastic, and unitary elastic. A product that is elastic obtains a condition wherein the percentage change in the quantity demanded is greater than the percentage change in price.
Price elasticity of demand can be defined as “a measure of responsiveness or sensitivity of consumers to price change”. With some products, consumers have a higher responsiveness to price changes. These products are said to have a relatively elastic demand. On the other hand, some products have a low responsive to price changes.
Responses to a situation depend on several things such as stimulus, what we have been taught by others or observed in others, biological DNA and personality. Because most of these factors can never be the same to
The easier it is to swap, the more elastic the demand of such a product is (Mankiw 90).
Type of want is satisfied by product; if the product satisfies basic needs or necessities such as medical care, basic food stuff and housing, then the price elasticity of such
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