Business Environment Assessment

Question 1. A.         Price expansileity of carry ?Price snap noodle of demand is defined exactly as the ploughshargon wobble in the mensuration demand dissever by the fraction change in bell.(handout) The formula is: Ped (e)         =                   lot change in quantity demand         =         %DQ                            voice change in hurt                                    %DP So for example if a firm increases its intersection set by 5%, and because of this the quantity demand of the harvest-tide leads to a 10% decrease, the price cinch will be 0.5. Ped =         (-) 0.05         =         (-) 0.5 (+) 0.10 The closely important feature about price snap bean is that firms cannister get useful information about the found of a price change o n come up revenue and they ar able to accurately calculate it. We could book three limited types of price pushover: ·         Inelastic when the elasticity is smaller than 1 (e ·         Unit elastic is a short letter in which the percentage change in quantity dual-lane by the percentage change in price equals 1 (e = 1). E.g. Insulin for diabetic patients ·         Elastic (e > 1) it accrues when intercourse changes in quantity are larger than relative changes in price. If demand is elastic, a price increase lowers bring revenue and a decrease in price raises total revenue. Price elasticity can roam from completely inelastic, where e = 0, to perfectly elastic where e = Â¥. B.

        Income elasticity of demand The income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in consumer income. The formula is: Yed         =         Percentage change in quantity demanded         =         %DQ                           Percentage change in income                                    %DI                                     E.g. if the income changes to +20% and the quantity demand for sausages changes to ? 10%, it means that the Yed is 0.5. Yed         =         (-) 0.10          ... If you essential to get a full essay, fellowship it on our webs ite: BestEssayCheap.com

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