Elasticity

Running Head : ELASTICITY ANALYSISNameUniversityCourseTutorDateELASTICITY ANALYSISIntroductionManagerial economics merge microeconomic theory with quantitative tools to help managers in making managerial decisions to solve various organizational problems (Michael , 1997 . Major microeconomic outline that helps managers in making decisions is outline (ibid 1997 . Through the use of analysis , managers puddle been able to make decisions that add-on profitability and ontogeny of their organization (Samuelson , 2001 ?Qd ?P Where ?Qd - Change in bill requiremented everyplace original requisite measure ?P - Change in footing everywhere original bellManagers use PEoD to see how demand of a certain good or helping is highly warm to a change in its legal injury . If the rate of price elasticity is high , it shows more than customers are sensitive to changes in prices , that is , consumers of that good or service will buy less(prenominal) quantity if price increase and buy more quantity of the commodity if the price reduces The demand of the commodity (good or service ) crowd out be termed as price elastic (Schenk , 2007Very down in the mouth price elasticity indicates that changes in price of that commodity have little influence on demand . Even if price falls or rise customers will buy the alike quantity of the commodity and the customers decision on the quantity they demand is independent on change of price This commodity trick be termed to be price inelastic (Michael , 1997Managers use this price elasticity analysis to make pricing decision (Samuelson , 2001 . If a good or service is price elastic compass price of the commodity at lower price below the industry s average price will greatly increase demand of that commodity , increase revenue , increase securities industry share , reduce the direct cost of production repayable to economies of scales and thus profitability (Ibid , 2001 ?Qs ?PWhere ?Qs - Change in quantity supplied over original quantity supplied ?

P - Change in price over original price levelIf PEoS is greater than 1 , then the translate is price elastic , i .e quantity come forth of a good will change when its price changes (Humphrey 1997 . When there is increased demand of input in a firm , managers can increase price of input they buy to get more suppliesIf the PEoS is equal to 1 , the supply is unit elastic , that is , for each unit of price changes supply changes at certain units (Humphrey , 1997 For poser , for each increase in 5 increase in iPod prices , iPod suppliers increase their supply with 5 ,000 unitsIf the PEoS is less than 1 , the supply is price inelastic (Humphrey 1997 . In this case change in price of a good or service does non influence quantity supplied . Managers do not need to make out or price to raise their supplied good , but olfactory modality into other factors that can attract and retain reliable and efficient suppliers (Michael , 1997 ?Qd ?IWhere ?Qd - Change in quantity demanded over original quantity demand level ?I - Change in income over original income levelManagers use this elasticity analysis to see how sensitive the demand of a...If you want to get a full essay, indian lodge it on our website: Ordercustompaper.com

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