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ECO - Marginal Analysis EGT1




Question;Economists use elasticity to measure consumer;responsiveness to changes in the various determinants associated with demand.;Elasticity addresses percentage changes i.e. a percentage change in quantity;demanded divided by a percentage change in (own price, the price of another;good, or income). Understanding elasticity is important to businesses and;policy makers alike as they consider how a potential change will impact markets;when consumers adjust their purchasing behaviors. Help answer questions A-G;Task;A. Discuss elasticity of demand as it pertains to elastic, unit, and inelastic;demand.;B. Discuss cross price elasticity as it pertains to;substitute goods and complementary goods.;C. Discuss income elasticity as it pertains to;inferior goods and to normal goods (sometimes also called superior goods).;D. Use an example to discuss why demand tends to be;relatively elastic in a situation where ?Availability of Substitutes? exists.;E. Discuss the ?Proportion of Income Devoted to a;Good? concept by contrasting two products purchased.s;1. Address, in your discussion, specific examples of how the same percentage;change in the price of both goods affects the percentage change in the quantity;demanded for each of the two goods.;F. Contrast how a person would initially respond to;a relatively large increase in the price of a product in the short run as;opposed to how that same person might react to that same price increase over a;longer time horizon (i.e., the long run), using the ?Consumer's Time Horizon?;concept.;G. Identify by price range the areas on the demand;curve where demand is elastic, inelastic, and unit elastic using the attached;?Graphs for Elasticity of Demand, Total Revenue.?;1. Explain the corresponding impact on total revenue for each of the three;price ranges unidentified in part G.


Paper#56680 | Written in 18-Jul-2015

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