...EGT 1: Task 2-309.1.2-08 & 09 Elasticity of demand is the relationship between the demands for a product with respect to its price. Generally, when the demand for a product is high, the price of the product decreases. When demand decreases, prices tend to climb. Products that exhibit the characteristics of elasticity of demand are usually cars, appliances and other luxury items. Items such as clothing, medicine and food are considered to be necessities. Essential items usually possess inelasticity of demand. When this occurs prices do not change significantly. “The Cross-price elasticity of demand measures the rate of response of quantity demanded of one good, due to a price change of another good” (Economics.about.com, 2013). When two similar products are present they are considered to be substitutes for each other. For example, say you have Coke and Pepsi. When the price of Coke rises so will the increased demand for Pepsi and other like products. This is considered to be a positive relationship. The relationship is negative when you have two products that complement each other. For example, say the price of a car increases. When price escalates the demand for tires, its complementary product, will decrease. Income elasticity is a way that economists measure the level that people act in response to changes in their income that may effect the consumer purchasing more or less of a product. This form of measurement helps to classify products as inferior...
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...Course ID: EGT 1 Task 2 Task: Section A When discussing elasticity of demand we discover three major terms. When company A reduces the given unit price and the consumer reacts by purchasing larger quantities, which in turn creates an increased profit margin, we term this elastic meaning the increased demand percentage change in quantity is greater than the change in price percentage. Given the same scenario and consumer purchases increase, but not enough to cause a gain in revenue, instead it creates a loss in revenue, we call this inelastic demand. Unit elasticity can occur from the same scenario when the increase consumption causes revenue to remain the same with no increase or decrease. = The coefficient is what economist use to measure elasticity or inelasticity. Section B Cross elasticity of demand measures the sensitivity of consumer purchases. It shows the effect of price changes to consumer purchases. Example product X has price percentage change, which cause a percentage change in purchase quantity of product Y. = When we talk about cross price elasticity as it pertains to substitute goods, we can use the example of Coke and Pepsi. If the price of Coke is raised 15%, the consumption of Pepsi will go up in reaction. Pepsi would be considered a good substitute. This would be considered a positive cost elasticity for Pepsi because of the increase in sales; meaning that the sales of one product moves is the same direction as the change in price of another. In short...
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...EGT1 Task 2 A Define the following three terms A1. Elasticity of Demand is the consumers response or sensitivity to a change in price. It is classified as elastic, inelastic, or unit elasticity. Elastic demand is when a specific percentage change in price results in a larger percentage change in quantity demand. Inelastic demand is when a specific change in price produces a smaller percentage change in quantity demand, Unit elasticity is when the percentage in change in price is the same as the percentage change in demand. A2. Cross Elasticity of Demand is the ratio of percentage change in quantity demand of one good to the percentage in the price of some other good. A positive coefficient indicates the tho products are substitutes a negative coefficient indicates the two products are complementary. A zero or near zero cross elasticity means the products are considered independent. A3.Income Elasticity of Demand is the ratio of the percentage change in the quantity demand of a good to a percentage change in consumer income; it measures the responsiveness of consumer purchases to income changes. A positive coefficient means more of the product is in demand as income rises, they are known as normal goods. A negative coefficient mean purchasing of a product decreases as income rises means the product is an inferior good. B. Explain the elasticity coefficients for each of the three terms defined in part A. B1. Elasticity of Demand. If the coefficient is greater...
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...Western Governors University Economics and Global Business Task 2 Egt1: Task 2 A) Elasticity of demand is describes as the degree of percentage change in demand for a good or service due to variation in price. Elasticity measurements can be expressed by three types of demand; inelastic demand, unit elastic demand, or relatively elastic demand. To determine the percentage of change in demand for a product or service the price elasticity equation and coefficient are used. The coefficient Ed is defined as “the percentage change in quantity demanded of product divided by the percentage change in price of product X” (McConnell, Brue, Flynn, 2012, pg. 76) The three expressions of Ed are Elastic, Inelastic, and Unit Elasticity. Elastic demand occurs “if a specific percentage change in price results in a larger percentage change in quantity demanded” (McConnell, Brue, Flynn, 2012, pg. 77). For a product with inelastic demand Ed < 1. An example of elastic demand is when there is a 2% decrease in the price of chocolate that results in a 6% increase in quantity. Ed= .06/.02 = 3 Inelastic demand occurs “if a specific percentage change in price produces a smaller percentage change in quantity demanded.”(McConnell, Brue, Flynn, 2012, pg. 77) For products with inelastic demand Ed <1. An example of inelastic demand is when there’s a 2% decrease in the price of milk that results in a 1% increase of demand. Ed= .01/.02 = .5 Unit elasticity of demand occurs “where a percentage...
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...A. Summarize the four major pieces of legislation collectively known as the Antitrust Laws. Antitrust laws were put in place to make business’s compete fairly. These fall into four main areas: agreements between competitors, contractual arrangements between sellers and buyers, the pursuit or maintenance of monopoly power, and mergers. The four major pieces of legislation collectively known as the Antitrust Laws are; the Sherman Antitrust Act, the Clayton Antitrust Act, the Federal Trade Commission Act and the Celler-Kefauver Act of 1950. The Sherman Antitrust Act has two categories that are targeted; ○ to restrain or prevent trade among states or foreign nations ○ prohibit against monopolies. ○ Only the United States Department of Justice has the power to prosecute individuals who are suspected of violating this act, (unless the individual state has the power granted by its own antitrust legislation.) The Federal Trade Commission Act ○ created the Federal Trade Commission ○ gave the Commission the power to enforce United States Antitrust legislation. The Clayton Antitrust Act ○ passed to prohibit mergers and acquisitions when those would substantially lessen competition. ○ enabled state attorney generals the ability to prosecute and enforce federal antitrust laws. ○ outlawed price discrimination, regulated stock acquisitions, and tying contracts ○ The Robinson - Pitman Act amended the Clayton Antitrust Act by banning...
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...Egt Task 1 Quantity 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 TR TC $0.00 $10.00 $150.00 $30.00 $290.00 $50.00 $420.00 $80.00 $540.00 $120.00 $650.00 $170.00 $750.00 $230.00 $840.00 $300.00 $920.00 $380.00 $990.00 $470.00 $1,050.00 $570.00 $1,100.00 $680.00 $1,140.00 $800.00 $1,170.00 $930.00 $1,190.00 $1,070.00 $1,200.00 $1,220.00 Profit MR MC ($10.00) $0.00 $10.00 $120.00 $150.00 $20.00 $140.00 $140.00 $20.00 $340.00 $130.00 $30.00 $420.00 $120.00 $40.00 $480.00 $110.00 $50.00 $520.00 $100.00 $60.00 $540.00 $90.00 $70.00 $540.00 $80.00 $80.00 $520.00 $70.00 $90.00 $480.00 $60.00 $100.00 $420.00 $50.00 $110.00 $340.00 $40.00 $120.00 $240.00 $30.00 $130.00 $120.00 $20.00 $140.00 ($20.00) $10.00 $150.00 A. 1. Total revenue is found by multiplying output by the price. We also will find the profit amount by subtracting the total cost from the total revenue. From there we look for the largest difference in the Total cost and total revenue which will give us the maximum profit amount. 2. The Marginal Revenue and Marginal Cost approach for profit maximization is found when the marginal revenue equals the marginal costs. B. To figure marginal revenue we divide the change in total revenue by the change in quantity. 1. The marginal revenue decreases by 10 for each of the widgets that Company A produces. C. To figure marginal cost we divide the change in total costs by the change in quantity...
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...EGT1 Task 1 – Marginal Analysis The profit calculation of total revenue and total costs is Profit (P) equals total revenue (TR) minus total costs (TC) and focuses on maximizing this difference. Profit will be maximized when the total revenue, or the amount they would receive by selling that particular widget exceeds the total cost, or the costs associated with making this widget by the greatest amount. The greatest difference between these two is considered the profit.The profit calculation of marginal revenue to marginal costs is different where the company will compare the marginal revenue (MR) they would receive from selling one more widget to the marginal cost (MC) of producing that additional widget, and how much cost it would add to the total revenue and total costs. Profit maximization occurs when the marginal revenue received from the widget is the same as the marginal cost of producing the widget.Marginal revenue is calculated by dividing the change in total revenue (TR) by the change in quantity (Q) sold, which is calculated as ΔTR/ΔQ (MR = ΔTR/ΔQ) (Gish). Another way to figure marginal revenue is to take the total revenue of a particular quantity of widgets and subtracting the total revenue of one less widget. Quantity | TR | MR | 0 | $0.00 | $0.00 | 1 | $150.00 | $150.00 | 2 | $290.00 | $140.00 | 3 | $420.00 | $130.00 | 4 | $540.00 | $120.00 | 5 | $650.00 | $110.00 | 6 | $750.00 | $100.00 | 7 | $840.00 | $90.00 | 8 | $920.00 ...
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...Task I EGT 1 Western Governors University November 10, 2014 A. In this monopolistic competitive market scenario, profit maximization can be arrived by working the numbers in two separate approaches. The first is Total Revenue to Total Cost and profit maximization is derived by taking the total revenue and subtracting the total cost at each quantity level. Profit maximization is at the point where the gap is the largest between TR and TC. The second approach is Marginal Revenue to Marginal Cost. In this approach profit maximization is obtained by determining where MR is equal to MC. B. In the table below, the Marginal Revenue was calculated by the change in total revenue of that resulted from selling one additional unit of output and is further defined as the change in Total Revenue divided by the change in Quantity. Marginal Revenue decreases in this table because the Marginal Costs continues to increase as shown in the MR chart below: C. In the table below, the Marginal Cost increases and is a result of the additional cost of producing of one more unit of output. The calculation is derived by taking the change in Total Cost and dividing it by the change in quantity. Since the Total Costs increases between most units, the Marginal Costs also increase. See chart below: D. Profit maximization for Company A in the table below is at the quantity of 8 units of 8 because of the higher revenue. Using the Total Revenue to Total Cost approach (hi-lighted...
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...EGT 1 Task 1 William Jarrod Reed Western Governors University Student ID: 000178779 Mentor: Aminah Abdul-Hakim Throughout this task I will do my best to explain how firms determined to maximize profit do just that. Specifically I will delineate how such firms choose the optimum level of production or output for the goods they produce and how they behave with respect to various elevations of marginal revenue. In my attempt it will be appropriate for me to clarify the definitions of various economic terms in order to assure a proper understanding of my thoughts on this topic, I will provide these definitions throughout. Understanding the concept of profit maximization lies with the explanation of total revenue to total cost and marginal revenue to marginal cost. Total revenue is nothing more than the total quantity of a firm’s sales of a given product. On the other hand, marginal revenue is simply the increased revenue the firm will attain when it sells precisely one more unit of a product. We look to total revenue to reveal just how much money the firm will accrue from selling a specific quantity of product and we look to marginal revenue so that we might understand how much additional money the firm will make from the sale of each additional unit of that product. On the other side of the coin total cost tells us the entire economic cost incurred by the firm when it produces a specific quantity of a product. Marginal cost on the other hand describes...
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...EGT 1 Task 2 A. Define the following three terms: 1. Elasticity of demand The responsiveness or sensitivity of consumers to changes in pricing of products is measured with elasticity of demand. The more reactive consumers are to a price change, the more elastic or simply elastic a product is considered. The less reactive consumers are the less elastic or inelastic the product is (McConnnell,Brue 2011). 2. Cross-price elasticity (include substitutes and complements) The change in demand in one product caused by a price change in another good is called cross price elasticity. The change in the price of one product or goods that causes a change in the demand for another product is measured on the x axis of the demand curve with the cross price elasticity (McConnnell,Brue 2011). Goods can be complimentary; such as a dvd movie (complementary good) that must be viewed with a dvd player (base good) or substitute; such as one brand of soup for another. When goods are complementary that means they work together, so the relationship in their use reflects in the elasticity of price in relation to each other by moving in opposite directions. When goods work in conjunction with each other, cross price elasticity is negative- meaning an increase in the price of one product causes the demand for the other to decrease and a decrease in the price of one causes demand for the other to increase. For example if the price of dvd players decreases the demand increases and the price...
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...EGT-1 Task 3 Revised A. Summarize the four major pieces of legislation collectively known as the Antitrust laws. United States antitrust law is a collection of federal and state government laws, which regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers. The four major pieces of legislation known as the Antitrust Laws include: The Sherman Act, The Clayton Antitrust Act, The Federal Trade Commission, and the Celler-Kefauver Act. The Sherman Act was created in 1890 had two major provisions which was to prohibit conspiracies to restrain trade and also to outlaw monopolization. In 1914 the Clayton Act was passed to expand off of the Sherman Act. The Clayton Act strengthened the Sherman Act in several ways: price discrimination, typing contracts, acquisition, and interlocking directorates. In 1914, the Federal Trade Commission Act (FTC) was created to enforce antitrust laws and the Clayton Act in particular. The FTC investigates unfair competitive practices and when appropriate issues cease-and desist orders. In 1950 the Celler-Kefauver Act was created to close the loophole the was left available from the Clayton Act’s Section 7. This clause was put in place to stop a firm from acquiring stocks in a competitive firm in order to merge. The Celler-Kefauver Act closed that loophole in order to prevent any firm from reducing the competition. (McConnell 375) B. Discuss the intended purpose of industrial...
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...EGT 1 Task 1 A. 1. The profit maximization approach used when total revenue and total cost are compared is the largest positive gap or profit gained between total revenue less total cost. In the table provided the largest profit or profit maximization would be $540. When you produce 8 items profit is at its highest point. To calculate total revenue you take the price times the quantity and to calculate total cost you take the sum of variable and fixed costs. 2. The profit maximization approach used when marginal revenue and marginal cost are compared is to take the marginal revenue less the marginal cost. In this process you look at how each additional unit affects total revenue and total cost. Marginal revenue is equal to the change of total revenue divided by change in quantity and Marginal cost is equal to the change in total cost divided by change in quantity. Once marginal cost exceeds marginal revenue it is not effective to produce the product and there is no longer a profit maximization. The profit maximization approach when using marginal revenue and marginal cost is to make as many products as you can until marginal cost equals marginal revenue. B. 1. Marginal revenue it the change in total revenue divided by the change in quantity. To get total revenue so that you can calculate marginal revenue you need to take the price times quantity less total cost. Marginal revenue becomes elastic and stays constant when there is perfect competition. But marginal revenue usually...
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...another. Based on the incorporation of products into product groups, mixed integer linear programming (MILP) models are proposed for two scenarios, with and without backlogs. Then, the models are successfully applied to a real-world case with 70 product orders over a 128-h planning horizon. Compared with a literature model developed for a similar problem, the proposed models exhibit significantly better performance. 1. Introduction In the past decade, a large number of optimization models and approaches have been proposed for batch scheduling and planning. A number of reviews on the planning and scheduling of batch processes have been presented in the literature.1-6 Initially, discrete-time formulation models using the state-task network7 (STN) or resource-task network8 (RTN) were used for batch scheduling problems. Because discrete-time formulations become extremely large for large-size problems and finer discretizations, several techniques9-11 have been proposed to reduce the computational effort of large discrete-time MILP models. Increasing attention has been paid to continuous-time formulations to overcome the difficulties of discrete-time formulations. Pinto and Grossmann12 proposed a continuous-time...
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...EGT Task 1 A. Demand of a unit is inelastic when the price is one and the increase to price makes the revenue higher. Elastic demand occurs when the price is higher than one and with the fluctuation of prices increase and decreases total revenue will incline or decline. A good example would be when the demand measurement is changed as when a company lowers the price products to boosts or increase sales. B. The cross elasticity of demand measures how sensitive consumer purchases of one product (say, X) are to a change in the price of some other product (say, Y). We calculate the coefficient of cross elasticity of demand Exy just as we do the coefficient of simple price elasticity, except that Cross-price elasticity is a measure of how sensitive consumer purchases of one product are to a change in the price of some other product .Substitute goods are goods that can be used in the place of other goods, like bread and bagels. Complementary goods are goods that are used along with other goods, like coffee and creamer. In other words, they “complement” each other. 3. Income elasticity measures how much a change in a consumer’s income will affect their purchasing habits of normal goods, such as automobiles, groceries, and houses, as well as inferior goods, such as potted meat and bus tickets. Goods whose demand rises when incomes rise but decreases when incomes fall are normal goods. Goods whose demand rises when incomes decrease but decreases when incomes rise are...
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...EGT: Task 2 Elasticity of demand references the level of reaction that a consumer will display to a price change of a particular product. In general, this term describes a % change in the quantity demanded in response to % change in pricing. The general equation used to calculate elasticity of demand is defined as: (Gillespie, 2010). This number is then compared as a critical threshold. In the case of elasticity of demand, the critical threshold number is 1. If the result is greater than 1, the product is said to be elastic. Highly elastic products can offer a slight change in pricing and expect a sharp change in the demand for that product. If this number is less than 1, it is referenced as inelastic. These particular products are considered less price sensitive and can expect only slight demand for change in pricing, regardless of degree. In rare occasions, the elasticity of demand will be a perfect 1 and the unit will be considered unit elastic. Unit elastic essentially means that any change in price, whether large or small, triggers exactly the same percentage change in quantity (1- to -1 match). Cross price elasticity measures consumer responsiveness for the demand of a particular product to the change in price of a similar product. The equation for determining cross price elasticity is as follows: (Robert, 2008). Unlike elasticity of demand, this calculation is capable of producing negative results and the threshold number is 0. In the case of a positive...
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