Some questions with answers managerial economics

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Managerial Economics Q.1.0) For each of the following events, assume that either the supply curve or the demand curve (not both shifted). Explain which curve shifted and indicate the direction of the shift. a.From 1950 to 1979 the wages paid to fruit pickers increased while the number of fruit pickers employed decreased. b.During the same period the price of radio sets declined, while the number of radio sets purchased increased. c.Housing prices are rising but more houses are sold. d.Australian Airlines reduces its average plane fare by 30 percent in order to attract more customers. Ans. a) In this case the number of the fruit pickers has decreased while the wages of the fruit pickers has increased. Thus, the demand has not…show more content…
2.1.4 Perfectly elastic demand: A condition in which a small percentage change in price brings about an infinite percentage change in quantity demanded. │EdQx, Px│= ∞ 2.1.5 Perfectly inelastic demand: A condition in which the quantity demanded does not change as the price changes. │EdQx, Px│= 0 2.1.6 Influencing factors: The price elasticity is determined the following factors, the availability of the substitutes, time factor and the expenditure share of the product in consumer's budget. * Availability of viable options: The price elasticity is very much influenced by the availability of substitutes. The price elasticity is greater when the substitutes are more. This is because of the wider choices consumer has. The minimal changes in the price of one good will result immediate shift of the demand to the other good. The elasticity for the broadly defined commodities tends to be more inelastic than the demand for specific commodities. This is because the specific products are demanded on the basis of the consumer's tastes, preferences, likes, passion and need. * Time factor: The time factor influences the character of the demand of the good. In general, the availability of time allows the consumer to pursue the substitutes, which eventually results in the decline of the demand for the good whose price has increased. In short time, the demand is more likely to be inelastic for the reason that

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