decision making factors of taxations are: adequacy, broad basing, efficiency and equity. The price elasticity of demand is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers’ plans remain the same. The income elasticity of demand is a measure of the responsiveness of the demand for a good or services to a change in income, other things remaining the same. VAT is an indirect tax where the tax is charged as a percentage
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READING THIS CHAPTER, YOU SHOULD BE ABLE TO: 1 Discuss price elasticity of demand and how it can be applied. 2 Explain the usefulness of the total revenue test for price elasticity of demand. 3 Describe price elasticity of supply and how it can be applied. 4 Apply cross elasticity of demand and income elasticity of demand. 4 Elasticity In this chapter we extend Chapter 3’s discussion of demand and supply by explaining elasticity, an extremely important concept that helps us answer such questions
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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
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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
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DEMAND Two important forces of market are Demand & Supply Demand Can be defined as the desire for a good for whose fulfillment, a person has sufficient resources & willingness to buy the good. Desire – without money income, is a mere desire Potential demand - Desire with resources but without willingness to spend Effective demand - Desire accompanied by ability & willingness to pay Individual Demand – Quantity of a commodity that a person is willing buy at a given price over
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Demand Estimate 1 Today, there are thousands of different frozen foods in North America, which provide us with the nutrients we need, this has become a large part of our diet. The demand estimation of a leading brand of low calorie, frozen microwavable food is based on the following demand equation for its product using data from 26 supermarkets for the month of April. QD= -5200 -42P + 20PX + 5.2I + 0.2A + 0.25M (2.002) (17.5) (6.2) (2.5) (0.09) (0.21) R2=0.55 N=26 F=4.88 Q= quantity
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TO ECONOMICS Elasticity & Taxation Blanquerna-Universitat Ramon Llull Salvador Illa Roca 2014-2015 1 Current events 2 3 4 Elasticity 5 Where we are… 1. 2. 3. 4. In the subfield of Microeconomics Studying the S&D model… …which describes how competitive markets work Have studied… 1. how much consumers & producers gain from participation in the market 2. Why governments intervene in markets and what are the consequences 5. Will focus on… 1. What is elasticity 2. taxation
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Quantitative Demand Analysis Overview . The Elasticity Concept Own Price Elasticity Elasticity and Total Revenue Cross-Price Elasticity Income Elasticity II. Demand Functions Linear Log-Linear III. Regression Analysis The Elasticity Concept How responsive is variable “G” to a change in variable “S” If EG,S > 0, then S and G are directly related. If EG,S < 0, then S and G are inversely related If EG,S = 0, then S and G are unrelated The Elasticity Concept
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Topic: “Elasticity of Demand and Managerial Decision Making” The demand of a commodity depends on the size of the total market or industry demand for the commodity which in turn is the sum of demands for the commodity of the individual consumers in the market. The demand for a commodity arises from the consumers’ willingness and ability to purchase the commodity. Consumer Demand Theory postulates that the quantity demanded of a commodity is a function of the price of the commodity, the consumers’
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Market Demand The demand for a good or service is defined as quantities of a good or service that people are ready to buy at various prices within some given time period, other factors besides price held constant. And law of demand is the inverse relationship between price and the quantity demanded. It means the higher the price, the lower quantity demanded and vice-versa. A change of demand can be affected by two factors. First, the changes of price result in the changes in quantity demanded.
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