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Market Economy - Essay Example

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Market economy insinuates the relationship between the quantity of goods in demand, and their pricing according to Altvater (1993). With such factors in consideration, the market will have to shape its demand for the products in the market depending on the prevailing prices. …
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Market Economy
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Market Economy

Download file to see previous pages... Therefore, the market will only depend on the pricing, which affects their frequency for demand of some products. For instance, when some prices of some goods are reduced, the customers could insist on increasing the quantity in demand. This technique could be used by markets to shape their demand for products in the market, depending on the market perception of the products and pricing (Gregory & Robert 2004).  In part A, there is need to have a focus on the provided data, which would be used in plotting the demand curve. Given the equation P = 10 – 0.5 Q, there should be a stated acceptable pricing and quantity that will be used by the consumers. The pricing will have a direct effect on the quantity in demand, as they are closely related. Using the current price of ? 6.50, the equation will be denoted as follows; P = 10 – 0.5 Q This will be followed by a substitution of the price, which is P ? 6.50 = 10 – 0.5 Q 6.50 – 10 = - 0.5 Q -3. 50 = - 0.5 Q 3. 50 = 0.5 Q 2 *3. 50 = 0.5 Q *2 7=1Q Q = 7 When the pricing of the moonshine club is at ? 6.50, the attendance according to the above mentioned equation will be seven. This means that, the attendance will be at 7, when the pricing is at ? 6.50. Using the above equation, there is a possible curve that could be derived, given the pricing range from ? 0 to ? 10. The pricing and attendance will have change, depending on the curve and preference of the demand. For instance, many people will increase their attendance when the pricing is low. pricing quantity 0 20 1 18 2 16 3 14 4 12 5 10 6 8 7 6 8 4 9 2 10 0 In plotting a demand schedule, there are various considerations that should be factored. The First factor is the pricing of the moonshine club. The second consideration is the demand for the services of the moonshine club. When the price of the club is at 10, there would be a possible zero attendance. However, when the price of the club is at 0, the attendance is likely to be at 20. The elasticity of the moonshine club is evident in their pricing. The highest pricing is denoted at 10, which brings a zero attendance. However, when the club decides to reduce its pricing to zero, the attendance will be full at 20. To make a better reflection on the elast5city of the club in pricing, there is need to focus on the equilibrium point. The equilibrium point is where the lines intercept. This is when the price is at ? 6, and the attendance will be denoted at 8. In part B, there are several considerations that could be used to make the favourable changes in the pricing and demand for the services of moonshine club. In the first instance, when a substitute club initiates a reduction of the pricing from ? 5 to ? 4.50, there are possible changes that could be discovered. Since moonshine is charging ? 6.50. With two visits to moonshine club, the customer will be spending ? 13.00. However, going to the substitute charging ? 4.50 will be favorable as the customer would make three visits which will be charged a ? 13.50. ? 5.00 ? 4.50 2 3 In this graph, it is evident that a person would prefer three visits to a substitute club, than spend the equivalent on two visits top moonshine club. In the second scenario, there is a change in the annual income which is a 10 percent increase. With such an increase, there is a possible increase in the ...Download file to see next pagesRead More
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