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Economic managment - Essay Example

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The following calculations portray the performance of Pepita disco on various grounds of economy that includes effects of cost variations on the net margin and elasticity that…
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Economic managment
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Economic managment

Download file to see previous pages... This implies that;
Calculating the new quantity X we make use of elasticity equation (which is in question 1 part l). This means -1.7 = ((X- 40)/ ((X+40)/2))/ ((5.5-5)/ ((5.5+5)/2)) and this implies that X = 34.909091 million units. New revenue as a result of this will be = 34.909091*5.5 = 203 M. the absolute margin for Yuckles will be = 203 – 120 – 60 = 23 M. the % change in margin will be = ((23 – 20)/20)*100 = 15%.
b) When the price reduces by 10% it implies the unit new price is 4.5. Thus using the same elasticity formula we can solve for the new quantity X i.e. -1.7= ((X- 40)/ ((X+40)/2))/ ((4.5-5)/ ((4.5+5)/2)) = 42.266667 million units. The new revenue will be = 42.266667*4.5 = 190.2 M. The new absolute margin will be 190.2 – 120 – 60 = 10.2 M and the % change of the margin is ((10.2 – 20)/20)*100 = ...Download file to see next pagesRead More
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