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Price Elasticity of Demand - Term Paper Example

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A writer of the paper "Price Elasticity of Demand" outlines that when elasticity is equal to one it is called unit elasticity and the change in quantity demanded causes a proportionate change in price. So a price change in either direction will not yield a change in revenue…
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Price Elasticity of Demand
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Download file to see previous pages When elasticity is greater than 1 the quantity demanded changes to a greater degree than the change in price. The demand curve aligns increasingly aligns itself to the x-axis in the case of near infinite elasticity, meaning that the quantity demanded is particularly responsive to changes in price. This case is also known as being perfectly elastic and is shown in the graph below: From this demand curve, it is evident that an extremely minute change in price would lead to an infinitely large change in quantity demanded. This scenario can be applied to perfectly competitive markets or luxury items. When elasticity is less than one the quantity demanded response insignificantly to changes in price. Increase the price would increase revenue, and vice versa. As the elasticity approaches 0, the demand curve becomes parallel to the y-axis. So the quantity demanded becomes more or less independent of price. This is known as being perfectly inelastic demand. Integration is the concept of supply chain management that origins from microeconomics. The basic idea is to partner or collaborate with all the stakeholders relevant to the production of goods and services offered by an organization. There are several ways of doing so; we will look at each in detail along with its advantages and disadvantages. In horizontal integration, an organization merges with its competitor(s) that produce similar products. Advantages - The basic advantage of horizontal integration is that it may provide economies of scale. Increased distribution capacity and market access are also possible, leading to greater market share. Disadvantage - the major disadvantage is that since horizontal Integration restricts competition it might lead to the creation of conglomerates or even monopolies. This, in turn, can be harmful to the interests of end-consumers. ...Download file to see next pagesRead More
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