Satisfactory Essays
289 Words
Grammar
Plagiarism
Writing
Score
SUBDOMAIN: 309.1 - ECONOMICS
Competency 309.1.2: Supply and Demand - The graduate applies the laws of supply and demand to develop a desirable relationship between supply and demand in a given situation. Objective 309.1.2-08: Differentiate between elastic and inelastic demand.
Objective 309.1.2-09: Discuss the application of elastic and inelastic demand in a given marketing situation.

Introduction:
Supply and demand concepts have application in everyday life. They also directly impact the business person in daily decisions.

A. Define the following three terms:
1. Elasticity of demand
2. Cross-price elasticity (include substitutes and complements)
3. Income elasticity (include normal and inferior goods)
B. Explain the elasticity coefficients for each of the three terms defined in part A.
C. Contrast the terms defined in part A.
1. Explain the significance of differences among the three terms you contrasted in part C.
D. Explain whether demand would tend to be more or less elastic for each of the following three determinants of elasticity demand:
1. Availability of substitutes
2. Share of consumer income devoted to a good
3. Consumer’s time horizon
E. Provide an example for each of the three determinants in part D.
1. Explain the logical impacts to business decision making that result from each of the examples you provided in part E.
F. Differentiate between perfectly inelastic demand and perfectly elastic demand.
1. Illustrate the difference between the terms in part F with specific descriptions or graphs.
G. Explain the relationship between elasticity of demand and total revenue for the following ranges along the demand curve, using the attached “Graphs for Elasticity of Demand, Total Revenue.” Include the impacts to quantity demanded and total revenue when there is a price decrease, ceteris paribus.
1. Elastic range
2. Inelastic range
3. Unit-elastic range
H. Include all in-text citations and references in APA format.

## You May Also Find These Documents Helpful

• Good Essays

Price earnings ratio is calculated by dividing market price per share of common stock by earnings per share. This ratio shows the market price of one dollar of earnings. In 2011, this ratio was \$5.21 and in 2012 it rose to \$5.32. The industry average ranges from 7 to 5.5. At \$5.32, I would say company G shows weakness in this…

• 1171 Words
• 5 Pages
Good Essays
• Good Essays

• 446 Words
• 3 Pages
Good Essays
• Good Essays

Elasticity of Demand pertains to the relationship of price and need of a product. If a price increases will the demand increase or decrease? When a demand is elastic, it means even a small change in price can cause a large change in the quantities consumers purchase. (McConnell, pg. 77) So for example in an elastic demand if you reduce the price of a good the demand will increase a large amount and revenue then increases. When the is inelastic, according to McConnell it means when there is a price change it only causes a small change in the amounts consumer purchase. This can result in less total revenue. If a company drops the price of something, even if they sell more it doesn’t mean they will make more overall. If it is inelastic, the revenue can drop. There is also something called perfectly inelastic, which means and change in price results in absolutely no change in demand. This is rare and an extreme situation. There is also demand in unit elastic which “demands occurs where a percentage change in price and the resulting percentage change in quantity demanded are the same”. (McConnell, pg. 77)…

• 1144 Words
• 3 Pages
Good Essays
• Good Essays

Martial Arts organization teaching men, Women, and Children in the United States desires to open a “Dojang” or “Training Hall” in South Korea offering World Class Martial Arts and Competition training.…

• 1232 Words
• 5 Pages
Good Essays
• Satisfactory Essays

e. Consider the industry of your company and the current economy, and then explain how these factors might impact your company’s sales. If you do not think these factors would impact your sales, explain why they wouldn't. (2-4 sentences. 2.0 points)…

• 573 Words
• 3 Pages
Satisfactory Essays
• Good Essays

An opening paragraph (introduction) of about 25-40 words in length and provides the most important and interesting news.…

• 1565 Words
• 7 Pages
Good Essays
• Good Essays

This experiment is concerned with identifying photosynthetic pigments found in spinach plants and determining the spectrum of light each absorbs. By using paper chromatography, different pigments of spinach leaves can be separated. The knowledge gained in this experiment is relevant to understanding how the process of photosynthesis works. A Real-world application for this includes the harvesting of clean energy sources, as scientific advances have led the way to artificial photosynthesis on the path to replace fossil fuels (Nath, 237).…

• 673 Words
• 3 Pages
Good Essays
• Better Essays

Joseph J. Ellis is a well-known historian. He earned his Bachelor’s degree from the college of William and Mary, and his masters and Ph.D. at the University of Yale. Ellis is currently a full time professor of the Commonwealth at the University of Massachusetts at Amherst.…

• 873 Words
• 3 Pages
Better Essays
• Satisfactory Essays

3. If the quantity demanded of tea increases by 10% when the price of tea decreases by 2%, the price elasticity of demand for tea is:…

• 1183 Words
• 5 Pages
Satisfactory Essays
• Good Essays

2. Explain why the demand for residential natural gas (gas used for heating, cooling, and cooking) is more elastic than the demand for residential electricity. 3. Would you expect the demand for a specific brand of running shoe to be more elastic or less elastic than the demand for running shoes in general Why 4. For each of the following goods, indicate whether you expect demand to be inelastic or elastic, and explain your reasoning Opera Local phone service Foreign travel Movies Eggs Milk 5. You observe a positive relationship between the price that your store charges for CDs and the total revenue from CDs. Is the demand for your CDs elastic or inelastic 6. Suppose that at the current price, the price elasticity of demand for a campus film series is 1.40. If the objective of the film society is to maximize its total revenue (price times the number of tickets sold), should it increase or decrease price 7. As the head of a state chapter of MADD (Mothers Against Drunk Driving), you are to speak in support of policies that discourage drunk driving. The number of highway deaths among young adults, which is roughly proportional to the groups beer consumption, is initially 100 per year. You have scheduled a news conference to express your support for a beer tax that will increase the price of beer by 10. The price elasticity of demand for beer is 1.30. Complete the following statement The beer tax will decrease the number of highway deaths among young adults by about ____ per year. 8. When the price of paper increases from 100 per ton to 104 per ton, the quantity supplied increased from 200 tons per day to 220 tons per day. What is the price elasticity of supply 9. You are a tax…

• 599 Words
• 2 Pages
Good Essays
• Powerful Essays

The conditions in the firm’s industry have a significant effect on the success of the firm. The demand increases in industries that sell a product that is highly demanded by consumers. Likewise, the demand will decrease in industries that have low demand for their products.…

• 1047 Words
• 5 Pages
Powerful Essays
• Satisfactory Essays

Possessing an understanding of how market equilibrium is maintained is essential for one who desires to become a business manager. As a business manager, it is important to understand how economic principles, and specifically supply and demand, are a part of one’s everyday business decisions. Relating these concepts of the market equilibrating process to ones prior experiences in a free market should be discussed. One must consider the law of demand, the determinants of demand, the law of supply, the determinants of supply, the efficient markets theory, surplus, and shortage.…

• 597 Words
• 3 Pages
Satisfactory Essays
• Better Essays

On QUESTION 3 Figure 1.0 will show the elasticity of demand will be at (D1). Price will be at (P1) and quantity will be at (Q1). Equilibrium will be at point A. The demand curve will be steeper.…

• 1359 Words
• 6 Pages
Better Essays
• Powerful Essays

The model of supply and demand is the economics profession’s greatest contribution to human understanding because it explains the operation of the markets on which we depend for nearly every-thing that we eat, drink, or consume. The model is so powerful and so widely used that to many people it is economic Markets bring together buyers (“demanders”) and sellers (“suppliers”) and exist in many forms.…

• 11277 Words
• 46 Pages
Powerful Essays
• Good Essays

c) Alternative uses of a product. A product with many uses tends to be more elastic, where as one with only one use tends to be inelastic.…

• 572 Words
• 3 Pages
Good Essays