Managerial Economics

4591 Words Jun 10th, 2011 19 Pages
MB0042 - Managerial Economics ASSIGNMENT SET I:
Ans.1. The price elasticity of demand is not the same for all commodities. It may be or low depending upon number of factors. The factors which influence price elasticity of demand, in brief, are as under: (i) Nature of Commodities. In developing countries of the world, the per capital income of the people is generally low. They spend a greater amount of their income on the purchase of necessaries of life such as wheat, milk, course cloth etc. They have to purchase these commodities whatever be their price. The demand for goods of necessities is, therefore, less elastic or inelastic. The demand for luxury goods, on the other
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The Company will finally collate the data of other competitor brands of Tea in the market with respect to price, sales, availability & distribution to identify a perfect launch for their product in order to attract maximum benefit.

Ans. 3. The following are some of the factors affecting the supply of a product:

The Price of Inputs:
In addition to the price of the product being the main factor as stated in the Law of Supply, the price of production inputs also plays a part. The lowest price at which a firm can sell a good without losing money is the amount of money that it costs to produce it. Producing a good or service involves taking inputs and applying a process to them to produce an output. The output is the finished good or service, and inputs are raw materials, labor, utilities, liscensing fees, or even other goods. These inputs are also known as factors of production. If the price of inputs goes up, the cost of producing the good increases. And therefore at each price producers need to sell their good for more money. So an increase in the price of inputs leads to a decrease in supply. Simarly, a decrease in the price of inputs leads to an increase in supply.
The Current State of production technology:
Production of a good involves taking inputs, applying a process to them, and producing an output. Well, production technology is involved in the process part. Increases in the level of production

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