Running head: THE BASIC CONCEPTS FOR ECONOMIC REASONING
The Basic Concepts for Economic Reasoning
Will Bury`s Gose Global Part I
Will Bury has invented a technology that gives the option of reading text materials digitally or
listening to it with synthetic voice which sound realistic (Will burry`s goes global, UOP).
In this paper I will explain economic concepts founded in Will Bur’s scenario, which will Bury`s have to take some important business decisions. The economic concepts in Bury’s Price Elasticity Scenario are:
A. Supply and demand
Supply and demand is one of the and basic concepts of the global economics and is
Considered a backbone of market economy. Demand is defined as the amount of product that consumers are able and willing to purchase during a specific period of time at each of a series of possible According to the law of demand, the higher the price of the good the less People will demand it, if all other factors remain equal. So there is inverse relationship Between the price and quantity demanded. The main factors which affect the demand and finally the Purchases are. These factors will be help to find out the amount of books he needs to sell.
1. Number of consumers in market
2. Consumers income
3. Consumers preferences
4. Similar Goods prices
5. Consumer’s expectations about future prices.
Supply is defined as the amount of product that producers are able and willing to make available for sale At each of the series of prices during a specific period of time (Mc Connell and Brue).According to the Law of Supply as price increases, the quantity of the supply increases; and as the price falls, the quantity Supplied fall. So there is a direct relationship between price and the quantity supplied. Basic factors Which affect the supply is
1. Number of sellers in the market
2. Price expectation
3. Resource price
4. Prices of other goods
5. taxes and subsides
Will Bury must understand the theory of supply and demand. The good understanding of these two Concepts will allow Bury to understand the market equilibrium with quantity and price in relation to Demand and supply.
B. Elasticity of demand and supply
Elasticity is defined as the degree to which a demand or supply reacts to the price change .Elasticity has Different types Like price elasticity of demand measures how sensitive is the quantity demanded to a Change in the price of goods. Price elasticity of supply measures how sensitive is the quantity supplied to A change in the price of good when elasticity is less than 1 in absolute value, the relation is inelastic. Inelastic demand supply means that the quantity demanded is not very sensitive to the price. When the Elasticity is greater than 1 in absolute value, the relation is elastic (McConnell & Brue, 2004). Elastic demand Supply means that the Quantity demanded is sensitive to the price change. General formula for price Elasticity is ELASTICITY =%CAHNGE IN QUANTITY/%CAHNGE IN THE PRICE
By using this concept Bury`s can calculate the consumers buying capability when the product prices Increases or decline.
3. Substitute Goods
Substitute Goods are the goods that can be used to fulfill the same needs one in the place of another. It Means that demand for same kind of goods is bounded together by the fact the consumers could trade of One good for the other, if it becomes advantageous to do so. According to Will Burry Scenario the 500 Page book on CD is a substitute for burry’s audio files of book, that is why, Will burry’s must stay Current On marketing research and stay current on other potential competitors who may offer substitute Products, because an increase in the price of goods will result in an increase in demand for its substitute Goods. 4. Cross Elasticity of Demand
The cross elasticity...
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