expansible and inexpansible. For both of these terms, think about the concepts of elastic and inelastic demand in economic terms. If the price of clothing is reduced for example, more items will be purchased indicating elastic demand. The same is not true of prescription drugs. If you need the prescription, you will continue paying for it despite the fact that the price goes up. Demand is inelastic in this case. When the economy is in recession, people have less discretionary income so the demand curve
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the Concept of Price Elasticity of Demand and Discuss Its Relevance for Business and Government Explain the concept of Price Elasticity of Demand and discuss its relevance for Business and Government Price elasticity of demand According to the law of demand: the lower the price the more product is bought. But consumer response to changes in price can vary significantly from product to product. Economists measure the response (sensitivity) of consumers to changes in product prices, using the concept
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budget line (price change plus rebate) will pass through the old consumption point of 800 gallons of gasoline, and any now affordable bundle that contains less gasoline must be on a higher indifference curve. The household will not choose any bundle with more gasoline because these bundles are all inside the old budget line, and hence are inferior to the bundle with 800 gallons of gas. 1. Which of the following three groups is likely to have the most, and which the least, price-elastic demand
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for cereals produced by the Big Three? Support your answer by using details from the case and referencing the factors that influence the elasticity of demand. The RTE cereal market had an oligopoly market structure where the big three companies are dominating the market. Putting this in mind, a consumer will be forced to pay regardless of how high the prices are increased due to the scarcity of substitutions available. This will result in an inelastic demand trait in this particular market. As
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Monopoly and Monopsony Note that the extra revenue from an incremental unit of quantity, ∆(PQ)/∆Q, has two components: 1. Producing one extra unit and selling it at price P brings in revenue (1)(P) = P. 2. But because the firm faces a downward-sloping demand curve, producing and selling this extra unit also results in a small drop in price ∆P/∆Q, which reduces the revenue from all units sold (i.e., a change in revenue Q[∆P/∆Q]). Thus, Copyright © 2009 Pearson Education, Inc. Publishing as Prentice
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Elasticity measurs the responsiveness of quantity demanded to changes in price. Elasticity tells us how the change in one thing has an impact on another thing. This is important because it helps businesses decide on the best course of action to take regarding their business prices. It also helps the government and the business to understand if what they are doing is producing results or not.The rate at which the quantity demanded changes in response to a change in price is called price elasticity
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consumers are constantly trying to find the best price for medical coverage. When dealing with healthcare products and services consumers want the best insurance based on price, market options, and the consequences of being uninsured. Based on what I understood from reading Chapter 6 on elastic and inelastic demand, I would have to contend that Amerigroup’s products are both elastic and inelastic. Elastic healthcare means that the healthcare demand prices for the plans that Amerigroup offers are greater
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change in tuition prices will cause the revenue to rise, fall, or remain constant. Finally, applying a hypothetical tuition elasticity coefficient of demand for education value of -1.2, provides a tuition increase recommendation to the Nobody State University’s president and administration board based upon the university’s potential revenue impact. Historically, the demand for a university or college education has not reduced as prices have risen. In fact, even though prices have gone up, the number
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Our in class discussion last week focused primarily on opportunity cost, supply and demand, and elasticity. Before class we had concerns as we either had not discussed the concepts since high school or college or either had no clue of what these things were or what they meant. Some of us were also unfamiliar with the graphs being used and cringe at the sight of calculating formulas into a graph. At this point there are varying degrees of comfort with the material, but we are optimistic with more
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