ECO 550 - Managerial Economics and Globalization April 28, 2014 Elasticity Elasticity is defined as the ratio of the relative change of the dependent variable to changes in the independent variable (Dick, 2002). Additionally, it can be said to be the percentage change of one variable given the percentage change in another variable (Boyes, & Melvin, 2012). Price elasticity refers to the responsiveness of the quantity demanded to price changes. It is given by; =
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14 The Demand Curve 15 The Supply Curve 18 Market Equilibrium 21 Shift in Demand 25 Shift in Supply 26 3. Elasticity of Demand and Supply 29 Price Elasticity of Demand 30 Types of Elasticity of Demand 31 Determinants of Price Elasticity of Demand 34 Price Elasticity of Supply 38 Types of Elasticity of Supply 39 Determinants of Price Elasticity of Supply 41 4. International Trade 44 Introduction to International Trade 45 International Trade Restrictions 48
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CH2 1. Suppose the demand curve for a product is given by Q = 300 – 2P + 4I, where I is average income measured in thousands of dollars. The supply curve is Q = 3P – 50. a. If I = 25, find the market clearing price and quantity for the product. Given I = 25, the demand curve becomes Q = 300 ( 2P + 4(25), or Q = 400 ( 2P. Setting demand equal to supply we can solve for P and then Q: 400 ( 2P = 3P ( 50 P = 90 Q = 220. b. If I = 50, find the market
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Supply and Demand One of the most critical concepts in the study of economy and the way our world works is: supply and demand. This essentially helps use understand markets and the way we consume the things we need and want on a daily basis. Supply and demand concepts have application in everyday life and in business. Essentially supply and demand are determined separately, the sellers determine the supply and the buyers determine the demand. The price of the product or service offered is never
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quantity of a product that consumers are able and willing to purchase at various prices over a period of time Market: where or when buyers and sellers meet to trade or exchange products. It is important to remember that a want and demand are entirely different what consumer’s want they may not actually purchase. Notional Demand: The desire for a product Effective Demand: The willingness and ability to buy a product The definition of demand assumes that the only factor affecting demand is price
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(Peoples, 2012). Price elasticity is a measure of how responsive consumers are to price changes or consumers' price sensitivity to changes in price. From the law of Demand, we know for certain that an increase in the price of a product will always result in a decrease in the amount demanded and vice versa. That is, we know the direction of the change. Price Elasticity answers the question: When price goes up, how much does the quantity fall. Knowledge of price elasticity helps a firm to accurately
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Nikki Roche Principles of Microeconomics: First Homework Subject 1: Introduction 1.Keynes’s Fallacy of Composition states that although economic policies may be good for one system, they could be harmful when applied to a different system. An example would be an individual saving money. It would be beneficial to the individual, because he wouldn’t spend all of their income, however it would be bad for the economy since there wouldn’t be money being re-infused. Macroeconomics looks at the
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Demand Estimation COURSE: ECO 550 – Managerial Economics and Globalization Assignment 1: Demand Estimation I work for a leading brand of low-calorie frozen microwavable dinners, called Nukims. My supervisor has asked me to compute the elasticity of each independent variable, in a demand model for our product, which uses data from 26 supermarkets around the country in the month of April. The following is the regression equation, with the standard errors in the parentheses for the demand
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Concept of Price Elasticity and Total Revenue The importance of the price elasticity of demand for a business can be shown by the effect that it has on total revenue. The business will want to know whether a proposed price change will increase or decrease total revenue. Total revenue, by definition, is equal to the price times the quantity sold (TR=PxQ). [sometimes, when dealing with elasticity, the language used may call this total expenditures instead of total revenue, but it has the same
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CHAPTER 3 Problem 7 (page 80) Price Quantity Quantity demanded supplied 20 180 60 30 160 80 40 140 100 60 100 140 70 80 160 80 60 180 100 20 220 a. Suppose that the price of gum is 70¢ a pack. Describe the situation in the gum market and explain how the price adjusts. At p=70, there is a surplus (excess supply), and we should expect the price to go down. b. Suppose that the price of gum is 30¢ a pack. Describe the situation in the gum market
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