Advantages And Disadvantages Of Elasticity Of Demand

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Question 1
NO. THEORIES/CONCEPT EXPLANATION
1 Elasticity of demand Elasticity of demand is a measure of the response of quantity demanded to a change in any economic variables. Tourist and locals are less sensitive to the changes in price at Central Market due to the price of substitute goods. Hence, the demand is said to be fairly inelastic.
2 Total Variable Cost Total variable cost is the overall expense related with producing or providing a service changes in direct proportion to the quantity provided. For instance, although the Central Market building is a fixed cost, maintenance for the building such as cleaning requires labourers which add to the costs. These additional costs are referred to as total variable costs.
3 Internal Economies of Scale When a firm expands its scale of production, the economies, which accrue to this firm, are known as internal economies. Marketing, an internal economy in Central Market, is achieved by buying raw materials and also selling final goods. Since it purchases the items from the small industries in bulk, Central Market can bargain on favourable terms to reduce its expenses.
4 External Diseconomies of Scale External diseconomies of scale are the disadvantages that arise due to over concentration and
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During our visit to Central Market, we observed that the parking bays provided were limited and could only accommodate a small number of visitors. Besides, the bus stop located along the roadside leads to massive traffic congestion when busses filled with visitors arrive at Central Market. Not only that, the nearest train station is at least a five minutes’ walk from Central Market. All this contributes to the lack of people visiting the colonial heritage and thus the lack of demand as well. Therefore, Kha Seng Group finds it difficult to attract customers due to the paucity in modes of
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