elastics and inelastics, Microeconomics

You just opened a flower shop and are trying to understand pricing issues. You were told that elasticities are very important in determining prices and what products to supply, so you decide to investigate this concept.

You call your friend, an economics professor, and ask, "What is the price elasticity of demand? What determines it? What is elastic and inelastic demand?"

To really understand it, compute the following price elasticities of demand:

•The price of a laptop increases by 20% and there is a 40% drop in the quantity demanded.
•The price of a pack of cigarettes increases by 10% and there is a 5% drop in the quantity demanded.
•The price of water increases by 15% but there is no drop in the quantity demanded.
Of the above examples, which is more elastic, and which is the least elastic? Why? Answer the following questions:

•Why is elasticity an important concept for a business? What if national income went up? How would that affect elasticity?
•What is the price elasticity of supply? What determines it?
•Compute the following price elasticities of supply:
?The price of a hotel room increases by 20%, and the quantity supplied increases by 10%.
?The price of health care goes up by 50% , and the quantity supplied increases by an equal amount.
?The price of a book increases by 10%, and the quantity supplied increases 20%.
?In the above examples, which is more elastic and which is the least elastic? Why?
•What kind of supply and demand elasticities would the following goods have, and why?
?Bridge tolls
?Beachfront properties
?Gourmet coffee
?Luxury automobiles
?Gasoline
?Cell phones
?Computers
?College tuition
Now that you are an expert on elasticities, what do you think would be the best time of year to raise prices, and why? What do you think the elasticities are in the flower business? Use graphs and hypothetical tables to support your answer. Please submit your assignment.
Posted Date: 12/3/2012 1:38:16 PM | Location : United States







Related Discussions:- elastics and inelastics, Assignment Help, Ask Question on elastics and inelastics, Get Answer, Expert's Help, elastics and inelastics Discussions

Write discussion on elastics and inelastics
Your posts are moderated
Related Questions
how to solve the credit multplier

(i) When the demand function is 2Q - 24 + 3P = 0, find the marginal revenue when Q=3. (ii) Given the demand function 0.1Q - 10 +0.2P + 0.02P2 =0, calculate the price elasticity of

Explain how foreign aid might help in the development process of a developing country. Definition/outline of various forms of aid, i.e. donor aid, tied aid, bilateral aid etc.


Economic Cycle The economic cycle is the long-standing sample of alternating times of economic growth (expansion) and decline (recession), followed by changing economic indica

What are the various forms of aid a developing country might receive? Here the student must show clearly the difference between grant (donor) aid; reciprocal (tied) aid; bilat

SUPPOSE A MONOPOLIST FACES A DEMAND CURVE OF D(P)=10-P AND HAS A FIXED SUPPLY OF 7 UNITS OF OUTPUT TO SELL.WHAT IS THE PROFIT MAXIMIMISING PRICE AND WHAT ARE ITS MAXIMUM PROFITS

A farmer produces maize according to the following production function Q m = AK 1/3 L 2/3 Where Q m is output of maize, A = land, K = capital and L = labour Given that

I am concerned that if we get into price war with Everest Solution

MEASURES TO PROMOTE GROWTH: In view of the recent global experience, the following steps need be taken to accelerate the rate of growth.  1) Mastering and constantly improv