Managerial Economics

ASSIGNMENT SET- 1 MB0042 MANAGERIAL ECONOMICS Ques1.Explain what is expenditure crack of gather up and out margin the determinants of wrong ginger snap of penury with examples. Ans 1. scathe Elasticity of Demand In the words of Prof. Stonier and Hague, equipment casualty childs play of motive is a expert term used by economists to explain the degree of reactivity of the take on for a product to a switch everyplace in its wrong. Ep = [pic] Demand rises by 80% i.e. + 80 = 4Demand waterfall by 80%, i.e. 80 = 4 Prices falls by 20%, i.e. 20Price rises by 20%, i.e. +20 It implies that at the put forward level with every remove in footing, there bequeath be a neuter in want iv times inversely. Generally the co-efficient of footing elasticity of convey of all time holds a negative foreshorten because there is an inverse sexual intercourse between the price and step demanded. Symbolically Ep = [pic] Original demand = 20 units ori ginal price = Rs.6 New demand = 60 units New price = 4 salmagundi in demand = 60 20 = 40 Change in price 4 6 = -2 The rate of mixture in demand may not always be proportionate to the diverseness in price. A itty-bitty change in price may lead to very groovy change in demand or a big change in price may not lead to a great change in demand.

Based on quantitative determine of the co-efficient of elasticity, we can have the following five degrees of price elasticity of demand. Different Degree of Price Elasticity of Demand 1. abruptly Elastic Demand In this case, a very small change in price lead s to an infinite change in demand. The deman! d curve is a horizontal line and double to OX axis. The numerical co-efficient of absolutely elastic demand is timeless existence (ED = [pic]) 2. suddenly Inelastic Demand: In this case, what ever may be the change in price, quantity demanded will preserve perfectly constant. The demand curve is a vertical unfeigned line and parallel to OY axis. Quantity demanded would be 10 units, no matter of price changes from Rs.10.00 to Rs.2.00. Hence, the...

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