Price elasticity of supply, Management Theories

You just opened a flower shop and are trying to understand pricing issues. You were told that elasticities are very vital in determining prices and what products to provide, 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 appreciate it, compute the following price elasticity's of demand:

  • The price of a laptop enhances by 20% and there is a 40% drop in the quantity demanded.
  • The price of a pack of cigarettes enhances by 10% and there is a 5% drop in the quantity demanded.
  • The price of water enhances by 15% but there is no drop in the quantity demanded

 

  • Why is elasticity an significant concept for a business? What if national income went up? How would that affect elasticity?
  • What is the price elasticity of supply? What verifies it?
  • Compute the following price elasticities of supply:
    • The price of a hotel room enhances by 20%, and the quantity supplied enhances by 10%.
    • The price of health care goes up by 50% , and the quantity supplied enhances by an equal amount.
    • The price of a book enhances 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

 

Posted Date: 3/22/2013 3:50:22 AM | Location : United States







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