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Question
(a) Describe clearly the three concepts of elasticity of demand. Use appropriate examples and diagrams to support your answer.
(b) Consider you have been appointed manager of a chocolate company. How far can you use these concepts to maximise revenue? Illustrate your reasoning, with the help of appropriate examples and diagrams.
The daily demand for ABC shoes is estimated to be as follows:-
Qx = 100 - 3Px + 4Py - 0.01M + 2Ax
Where Ax represents the amount of advertising spent on shoes (X), P is the price of good X, Py is the price of good Y and M is the average income. Suppose good X sells at $25 pair, good Y sells at $35, the company utilises 50 units of advertising and average consumer income is $20,000. Calculate and interpret the price, cross and income elasticities of demand.
Rework figure 1 assuming a closed economy
Wage Labour: A form of work in that employees perform labour for others, under their direction, in return for salaries orwages. Employer controls and owns the product of the labour
Mamun has a weakly income of 600 dollars. Price of chocolate is 5 dollar and price of potato is taka 10. Both are normal goods. Show the income and substitution effect for each of
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INTERNATIONAL DEVELOPMENT ASSOCIATION: International Development Association (IDA) is an affiliate of the IBRD. It was established in 1960 to provide "soft loans" to economica
What is an optimization in the methods of mathematics of modern economics? Optimization is a basic tool for the development of modern microeconomics analysis. Many of economic
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The End of the Malthusian Age We clearly no longer live in a Malthusian age. For at least 200 years improvements in the efficiency of labor made possible by new technologies a
Tom's pizza sells for $ 5.00 ea and serves an average of 425 customers per week. During a recent sale, Tom lowered the price to $ 4.00 per ea. Sales increased to 500 customers duri
The income elasticity of demand calculates the responsiveness of the quantity demanded of a commodity to changes in consumers' incomes. This is typically calculated by replacing t
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