Prepare an analysis by answering the above-noted questions

  

Week 2 Project - Due

Mar 7, 2018 11:59 PM

ECO2071 Principles of Micro-Economics SU01

Elasticity and Its Application

Over the last year your boss has noticed that it would be useful for your firm to understand how consumers behave when variables in the market change and how these changes affect the total revenue for your product. You have been asked to do an analysis for your product, Good A, by addressing the following questions and reporting the results to your boss in a formal paper.

Questions:

1. Define the price elasticity of demand? What      information does it provide? How is it calculated?
2. Define the income elasticity of demand? What      information does it provide? How is it calculated?
3. Define the cross-price elasticity of demand? What      information does it provide? How is it calculated?
4. What is total revenue? How is it calculated?
5. Define elastic, inelastic, and unitary elasticity      means. How are these related to total revenue? Explain your answers.
6. With respect to the price elasticity of demand,      construct a graph using the data in Figure1. Illustrate the ranges on the      demand curve that indicate elastic, inelastic, and unitary elasticity.      Explain your answers. Enter non-numerical responses in the same worksheet      using textboxes.
7. Calculate the total revenue for each level of demand      and post into the table, Figure 1. (Copy and paste this table into the      Microsoft Word document that will form part of your submission.)
8. Using the midpoints formula presented in the      textbook, calculate the price elasticity coefficient for each price level,      starting with the coefficient for the $4 to $6 level. For each      coefficient, indicate each type of elasticity: elastic demand, inelastic      demand, or unitary demand. Post your answers into the table, Figure 1.
9. Assume that the income of consumers changes by 10%,      and as a result the quantity demanded for Good A changes by 8%. What is      the income elasticity of demand for Good A? What does this mean for your      company?
10. Assume that the price of competing Good B decreases      by 5% and as a result, the quantity demand for Good A decreases by 8%.      What is the cross-price elasticity for your product? What type of goods      are Good A and Good B?

Figure 1: The Demand Schedule for Barbeque Dinners

  

 

Price 

Quantity   Demanded

Total   Revenue

Elasticity   Coefficient

Elastic   or Inelastic

 

$4

100

__________

XXXX

XXXX

 

6

80

__________

__________

__________

 

8

60

__________

__________

__________

 

10

40

__________

__________

__________

 

12

20

__________

__________

__________

 

14

1

__________

__________

__________

 

               

Required:

Prepare an analysis by answering the above-noted questions. Your analysis will consist of two documents as follows:

1. Microsoft Word document: Questions      1-5, 7-10.
2. Microsoft Excel worksheet: Question 6

Submit your documents to the Submissions Area by the due date assigned.

Week 2 Project 

Due March 7 at 11:59 PM