Study the demand elasticity for its products and discuss the availability of close substitutes for its products. How does that affect pricing decisions? Analyze the company’s profitability. Identify the economy or industry influences on its costs, operations, and profitability. Describe the competitive environment in which the firm operates, the distribution of market power, and the strategic behavior of the firm and its competitors.
By contrast, the price elasticity of demand tells you “how much” quantity demanded changes when price changes. It shows the responsiveness of a change in quantity demanded to a change in price. [text: E p. 114; MI p. 114] 2. Why do economists use percentages rather than absolute amounts in measuring the responsiveness of consumers to changes in price? There are two basic reasons.
Industry structure is categorized on market structure variables, which are believed to determine the extent and characteristics of competition. Those variables, which have received the most attention, are number of buyers and sellers, extent of product substitutability, costs, ease of entry and exit, and the extent of mutual interdependence [Baumol, 1982; Colton, 1993]. In the traditional framework, these structural variables are distilled into the following taxonomy of market structures: These four market structures each represent an
They then develop calculations to categorize these consumer patterns, and then use them as tools to provide insight into consumer reactions and possible future buying patterns. One of these tools is called the Price Elasticity of Demand. The Price Elasticity of Demand measures how consumer demand changes as a result of changes in price and it is represented as a coefficient. Elasticity is the main aspect of this coefficient and it represents how responsive or elastic consumers are to price fluctuations. This coefficient is calculated by dividing the change in demand by the original demand, and subsequently dividing that total by the change in price divided by the original price and the final
Such basic concept can be applied to all the decisions presented in the scenario, such as digitizing older books, using CD copies of the books, or hiring employees to do the job. Another important concept is related to demand and supply, where for the first part, the law of demand states that with other things equal, there is an inverse relationship between price and quantity demanded (47). Applying this concept to Will pricing decisions, the demand can be increased by lowering the price of the product, and vice versa.
Explain how it works. Answer: A method of estimating the price elasticity of demand by observing the change in total revenue that results from a change in the price, when all other influences
Consumer behaviour Week 1 introduction Consumer Behaviour is the acquisition, consumption, and disposition of goods, services, time and ideas by (human) decision making units (over time). Obtaining (purchase activities or acquisition) How you decide you want to buy, alternate products you might be considereing, gathering evaluating info, where you buy, how you pay for the product/purchase/transaction method, warranty etc Consuming (use activities) How you use the product, where on or off premise, how you store product, who uses the product, whn? Immediate or delayed consumption, how much you consume complete or partial consumption, how product compares with expectation Diposing (disposal activities) How you get rid of remaining
CHAPTER 3 SUPPLY AND DEMAND Answers to Review Questions 1. Under the horizontal interpretation, we begin with a price for the good and then use the demand curve to read the quantity demanded at that price on the horizontal axis. Under the vertical interpretation, we start with a quantity produced and use the demand curve to read the marginal buyer’s reservation price for the product on the vertical axis. Learning Objective: 03-01 AACSB: Reflective Thinking Bloom’s: Understand 2. The equilibrium price of a good is determined by the intersection of its supply and demand curves.
B) The study of how consumers spend their income. C) The study of how producers decide what inputs to hire and what outputs to produce. D) The study of how individuals, businesses, governments, and entire societies make choices as they cope with scarcity and the incentives that influence and reconcile those choices. E) The study of how consumers and producers meet each other at the market. Answer: D Diff: 1 Topic: Definition of Economics 3) Which of the following is a microeconomic topic?
The core of economic theory is based on supply and demand. Demand is what consumers are willing to buy at any given price. Supply is what suppliers are willing to sell at a given price. We can then relate this to the housing market. There are factors, which can increase or decrease supply, e.g.