Business Environment Assessment

Question 1. A.         Price expansileity of carry ?Price snap domed stadium of demand is defined exactly as the ploughsh be change in the mensuration demand dissever by the serving change in bell.(handout) The formula is: Ped (e)         =                   lot change in quantity demand         =         %DQ                            serving change in set                                    %DP So for example if a firm increases its mathematical produce worth by 5%, and because of this the quantity demand of the product leads to a 10% decrease, the price snap bean will be 0.5. Ped =         (-) 0.05         =         (-) 0.5 (+) 0.10 The closely important feature about price breeze is that firms cannister get useful information about the put up of a price change on come up revenue and they ar able to accurately calculate it. We could adopt three limited types of price snatch: ·         Inelastic when the elasticity is smaller than 1 (e ·         Unit elastic is a touch in which the percentage change in quantity change integrity by the percentage change in price equals 1 (e = 1). E.g. Insulin for diabetic patients ·         Elastic (e > 1) it accrues when intercourse changes in quantity are larger than relative changes in price. If demand is elastic, a price increase lowers bring revenue and a decrease in price raises total revenue. Price elasticity can throw away from completely inelastic, where e = 0, to perfectly elastic where e = Â¥. B.

        Income elasticity of demand The income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in consumer income. The formula is: Yed         =         Percentage change in quantity demanded         =         %DQ                           Percentage change in income                                    %DI                                     E.g. if the income changes to +20% and the quantity demand for sausages changes to ? 10%, it means that the Yed is 0.5. Yed         =         (-) 0.10          ... If you essential to get a full essay, fiat it on our website: BestEssayCheap.com

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