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n help economists ascertain whether it would be more profitable to increase or decrease the price of a particular product based on price elasticity of demand. Elasticity helps determine if a good is of inferior quality or normal quality based on price elasticity of demand. An inferior quality product is consumed less if the consumers’ income increasing while a normal quality product has higher consumption along with rising income of the consumer. Similarly, Elasticity can help decide whether the products are compliments or supplements. The difference between the two is that with complimentary goods the demand for one leads to demand for another of the same product, while supplementary goods are those that guide to less demand for another product. Cross price elasticity of demand determines if a product is a compliment or supplement. And lastly, price elasticity of demand can help economists find out whether her a supplier e.g. a farmer, will have the capability to suddenly increase their supply. Farmers and other agricultural goods producers have low price elasticity of supply as it takes them a long time to increase their supplies because their supplies take a long time to produce. So, in short, elasticity is used when economists want to know how something changes in relation to a change in another.
The concept of elasticity is an integral part of the theory of microeconomics. Law of demand tells us that an increase in the price of a product leads to a decrease in its demand. Here, Elasticity can tell us how much demand will decrease for every one per cent increase in price. An elasticity of 1 or higher is “elastic”. While inelastic refers to products that remain on constant demand no matter what their price
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The total revenue obtained from fines= $75 (price) and the inspectors issue 0.7 fines in one hour. Revenues= price x quantity. Expected return for an hour’s work = 0.7 x75= $ 52.5 b) Assume that Deakin’s parking inspectors are paid $35 an hour for checking cars for permits.
However, it is important to note that there are many pareto optimal outcomes. Both X and Y isoquants can be shifted without reducing the return from the other, or there could be an adjustment for an increase in both (Dwivedi, 2002 537). Question #2: The Coase theorem describes economic efficiency in the presence of externalities.
If the result if this formula is less than 1, the demand is known to be Price Inelastic. And vice versa, if the resultant is more than 1, this would mean that the demand is Price Elastic (Boyes et al, 2008). For example, in the following demand schedule, a change in price from?
A virtue implies a mean to righteousness (Aquinas 1993, 51). Critical distinction exists between being virtuous and acting virtuously. Therefore, an individual must not merely act virtuously in order to be termed as virtuous, but ought to know that he motives of his actions should be achieved through acting virtuously through firmness and certainty.
This shows the impact of taxes on cigarettes. The tax is devised in such a way to discourage smoking that the consumption of cigarettes has decreased by 20% according to a report. The factors that affect the size of the tobacco market is the tax rate that is imposed on cigarettes in the country and the smoking habits of the newer younger generation as a result of anti-smoking campaigns (Mankiw, 2012, p.72).
he price of my product is increased as well as if a particular resource is scarce, will that provoke a scramble for that resource are answered by making use of the concept of elasticity. If we use more technical jargon to define elasticity, it would be that it measures the
This is because I will receive several experience, which are best explained using the constructs of Health Belief Model. First, my situation is representative of the broader issue in the American society.
From basic microeconomic theory, as prices go up, where the demand for a good is elastic, then the consumption should go down (Mankiw 25-27). The implicit assumption here is that demand for cigarettes is elastic