Essay Example on When P 500 C 600 I 5500 A 10000 and M 5000 using regression Equation

Question 1 When P 500 C 600 I 5500 A 10000 and M 5000 using regression equation QD 5200 42 500 20 600 5 2 5500 0 2 10000 0 25 5000 17650 Price elasticity P Q dQ dP From regression equation dQ dP 42 So price elasticity EP P Q 42 42 500 17650 1 19 Likewise EC 20 600 17650 0 68 EI 5 2 5500 17650 1 62 EA 0 20 10000 17650 0 11 EM 0 25 5000 17650 0 07 Question 2 Price elasticity is 1 19 This clearly shows a 1 increase in the price of the product makes the quantity demanded to drop by 1 19 Therefore the demand of the product is elastic Consequently increase in price may discourage the customers and make them go away Cross price elasticity is 0 68 If the competitor s product price increases by 1 then quantity demanded of the product will also rise by 0 68 This product is fairly inelastic to the proce of the competitor and there is no reason to be worried about the competitor as their pricing will have no impact on the sales Income elasticity is 1 62 This shows that a 1 increase in the average area income will raise the quantity demanded by 1 62 With this point the product is elastic and the company will have to make a decision to raise the price if the average income also rises 

Advertisement elasticity is 0 11which translate that a 1 rise in advertising cost will raise the quantity demanded by only 0 11 Then demand is somewhat inelastic to advertising For that reason additional advertisement does not inevitably mean that a company can increase the price because this still could put customers off With respect to microwave ovens in the area elasticity is 0 07 which demonstrate an elevation of 1 in the number of ovens in the area accumulating the quantity demanded by a mere 0 07 Therefore in this characteristic demand is inelastic and the valuing strategy can just skip this element Subsequently quantity demanded is subtle to the value of product and the income of people but rather indifferent to the competitor s price and nearly totally indifferent to advertising and the amount of microwaves existing in that given area Question 3 A drop in price would increase the quantity demanded since the price elasticity is negative Furthermore the elasticity is a minute over accord Revenue is fully exploited when the level of elasticity is one With that in mind a price decrease will increase the quantity demanded and will lead to a total increase in sales as elasticity moves towards accord In my opinion the firm should cut the price just as it would upsurge the market share and the revenue produced Question 

This modification can also occur as an outcome of change in consumer fondness Source of the product can transform if there is a change in the number of product providers manufacture technological developments in addition to other elements like labor and raw material availability change which directly affect production costs Question 5 An upsurge in consumer revenue a price change in the price of a balancing product could root a rightward change of demand curve product as might a population upsurge or amplified favorite for the product A reduction in consumer revenue can cause a leftward shift of demand curve moreover an upsurge in price of a complementary product might cause the same leftward shift of demand curve Technology developments in food handling increased obtainability of inexpensive labor and uncooked materials improved tax cuts and government grants can source a rightward shift of supply curve A leftward shift can be caused by a reduction in obtainability or a surge in price of labor and uncooked materials increased taxes etc References References Grzybek P Ko hler R 2011 Exact Methods in the Study of Language and Text Dedicated to Gabriel Altmann on the Occasion of his 75th Birthday Renshaw G Ireland N J 2012 Maths for economics Oxford Oxford University Press Tavasszy L Jong G 2014 Modelling freight transport