Economics Elasticity Essay

1. A firm's current profits are $1,000,000. These profits are expected to grow indefinitely at a constant annual rate of 3.5 percent. If the firm's opportunity cost of funds is 5.5 percent, determine the value of the firm:

Price elasticity is an important concept to understand when beginning and maintaining a business that distributes goods or services. Elasticity is the economic concept that estimates when products should be introduced to consumers, and how (provided that all other variables remain constant) demand or supply will be affected by changes in the environment that affect price (Basic Economics, 2007-2010). Depending on how the percentage demanded/supplied is affected by price differentiation will determine whether or not a good or service is considerably elastic or inelastic, providing a sound guideline for business owners. The higher the elasticity, the more the demand will change if the price varies in the competitive market. Elasticity

Recent medical advances have greatly enhanced the ability to successfully transplant organs and tissue. Forty-five years ago the first successful kidney transplant was performed in the United States, followed twenty years later by the first heart transplant. Statistics from the United Network for Organ Sharing (ONOS) indicate that in 1998 a total of 20,961 transplants were performed in the United States. Although the number of transplants has risen sharply in recent years, the demand for organs far outweighs the supply. To date, more than 65,000 people are on the national organ transplant waiting list and about 4,000 of them will die this year- about 11 every day- while waiting for a chance to extend their life through organ donation

What is the effect on the equilibrium price and equilibrium quantity of orange juice if the price of apple juice decreases and the wage rate paid to orange grove workers increases?

The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the

A market demand analysis is used to help understand how much consumer demand there is for a given product or service. This type of analysis will help determine if a business can successfully enter a market and generate enough revenue and profit to maintain the business. One must identify the market and the growth potential.

Fill in the matrix below and describe how changes in price or quantity of the goods and services affect either supply or demand and the equilibrium price. Use the graphs from your book and the Tomlinson video tutorials as a tool to help you answer questions about the changes in price and quantity

The demand curve is used to show and predict future changes in the market. The demand curve is plotted on a grid with the prices on the y-axis and the quantity of good on the x-axis. The demand curve’s plots are made with lines that slope. When changes occur in the market, the demand curve will shift accordingly. When income increases the demand curve will shift outwards due to more goods being requested. Shifts can be caused due to a multitude of reasons including, but not limited to: changes in income, changes in preferences, changes in expectations, changes in the prices of competitors, changes in population and more. When the demand curve is combined with a supply curve, it can function as a multi-purpose graph that can also depict the equilibrium quantity, or the most efficient quantity of goods to be produced at the best

One factor that might have shifted this demand curve is a change in taste and/or preferences. Say this demand curve was for popcorn. When people really like and want popcorn the demand curve will shift. Another factor that might have shifted this demand curve is a change in price for a complement like cheese spread. If the price of cheese spread for popcorn is reduced then the demand for cheese spread and thus popcorn would increase, shifting the demand curve for popcorn.

We use multiple products on a daily basis, from toothpaste to ink pens. Though we may use these items for mere moments, there is a different supply and demand cycle for them. Every product has a different supply and demand cycle, and this cycle varies throughout time. Some items may constantly be in demand, like cotton, and others may be in demand seasonally, like eggnog. These shifts in supply and demand may influence the price of certain products, how much of the product is available at any given time, etc. Commodities available during only peak times throughout the year may even be substituted with a similar item. These seasonal items are considered

The Energy Information Administration of the Department of Energy began tracking weekly gasoline prices in 1990 by means of a survey of 800 service stations around the country. The average retail price for unleaded gasoline posted its fourth record high during the week of June 12, 2000, increasing 5 cents a gallon to an average of $1.681. The price at the pump is higher than the same period last year by 56 cents and has risen 16.2 cents over the past month (Anonymous, 2000).

Price elasticity of demand enables business organizations to predict how their total revenue will be effected in the event they change the prices of their products. When a given good has inelastic price elasticity of demand i.e. Ed 1, then the percentage change in the quantity demanded is greater that the change in price. Thus, raising the prices of such commodities results to decline in the total revenue because the business may loss customers to their competitors. Nonetheless, reducing the prices of goods with elastic elasticity of demand increases the total

The demand curve shows what happens to the quantity demanded of a good when its price varies, holding constant all the other variables that influence buyers. When one or more of these other variables changes, the demand curve shifts leading to an increase or decrease in demand. The table below lists all the variables that influence how much consumers choose to buy cigarettes.4

A set of graphs shows the relationship between demand and total revenue (TR) for a linear demand curve. As price decreases in the elastic range, TR increases, but in the inelastic range, TR decreases. TR is maximized at the quantity where PED = 1.

Elasticity of demand is shown when the demands for a service or goods vary according to the price. Cross-price elasticity is shown by a change in the demand for an item relative to the change in the price of another. For substitutes, when there is a price increase of an item, there is an increase in the demand for another item. When viewing complements, if there is an increase in the price of an item, the demand for another item decreases. Income elasticity is shown when there is a change in the demand for a good relative to a change in income. This concept is shown in how people will change their spending habits when their income levels change. For