Assignment Unit II:

Elasticity
MBAV 6053 - Economics for Managers
Columbia Southern University
Huynh Dong Ha
1. Elasticity information for goods: one with an elastic demand and one with an inelastic

demand.

a. Elasticity of demand

An elastic merchandise is described as goods for which an alternation in price causes a

noteworthy change in demand. The more substitutes there are for merchandises, the stretcher the

demand for that goods. Demand is sometimes plotted on a graph: The demand curve indicates

how the quantity demanded reciprocates to adjust in cost. The flatter the curve, the more elastic

the bridge.

Examples of elastic products are at the discretion of the consumer, such as grain labels. Some

foodstuffs are not an essential. It is sensible to contend that people will cease purchasing a

specific brand of grain if its price rises to the surface, particularly if other corresponding

products fail to keep pace with and keep their prices alike. Conversely, if this same brand of

cereal undergoes a strong sale, we would expect more buyers, on the assumption that the quality

level of this grain is comparable to similar products. and we were not in a deep recession.

Another instance, Heinz ketchup is usually sold at a wholesale price 10% higher than Hunt or

Del Monte and 20% higher than private brands. Richard B. Patton, president of Heinz USA,

producer Heinz Ketchup, stated that his company's continued success in the ketchup sector was

the result of extensive advertising, which allowed the brand to he sells their products to more

competitors [ CITATION Pau79 \l 1033 ].

b. Inelasticity of demand

An inelastic merchandise is described as goods where a shift in cost does not automatically

influence demand for that product. If the demand for a good or service is motionless when its

price or other determinants transform, it is considered inelastic. Namely, when prices vary or
buyer' incomes change, they will not change their buying habits. Lack of elastic products are

essential and often do not have a substitute that they can be easily replaced. Inasmuch as the

quantity demanded is duplicate nevertheless of price, the demand curve for a marvelously

inelastic merchandise is articulated as a upright line.

Case in point of inelastic products the most ordinary elements with inelastic demand are

utensils, remedy drugs and cigarettes commodities. In general, essential goods and medical

treatments tend to be inelastic, while luxury goods tend to be the stretches.

Albeit there are no thoroughly inelastic goods, there are some that come close. For example,

people need gas to drive their car. Even when gasoline prices skyrocketed, people still could not

quit their jobs, take their children to school, and drive to stores. Thus, people will still buy

gasoline at a higher price.

c. Predict changes in demand.

Types of goods: There are three types of goods, essential goods, convenience goods and luxury

goods. Requirements are crucial a good for underlying existence like edible material and

accommodation. Availability merchandises are goods that generate life more excellent and more

cheerful (e.g., television, roughage, or gym community). Luxury goods are more enjoyable and

can include sports cars, boats or expensive watches. Essential goods are often inelastic, meaning

price changes are unlikely to affect demand. In particularly, if the price of gasoline burns up,

demand crash metamorphoses much due to people necessitate consume their car to work.

Agreeable and opulence goods gravitate toward be more elastic since a change in an economic

variable can induce fewer demand for utilization. It is important to consider the tastes and

attitudes of consumers as one person can treat a product as a convenience while another sees it as
a luxury. Suppose that most people own an automobile and need it to go back and forth daily.

Although, some people who impuissant afford an extravagance car.

Price: One aspect that can induce the elasticity of demand for goods or service by price level. As

a model, modifying in the cost of a richness car can lead to a forceful vary in quantity demanded.

Such as if a comfort car maker has an glut of cars, the enterprises can diminished prices to boost

demand. If the price is shortened enough, the automobile can be cost-effective for purchser who

cannot buy a affluence car. Certainly, the level of change in costs can decide whether demand

has altered well and, if so, by how much.

Livelihood: Otherwise called the wage effect, the degree of earnings of the populace also sway

the elasticity of demand for goods and services. Idiomatic expression, an economy is dealing

with an economic collapse where many laborers have been halting. A decline in the annual

income of a large portion of the population can make luxury goods more elastic Specifically, a

downturn can create people to economize money rather than spend lavishly on luxuries like flat

panel display TVs or overpriced wristwatch.

Substitute Availability: If a substitute is feasible, the demand for replacement is elastic for the

merchandise. To put it another way, substitutes create the demand for hypersensitive goods or

services to price changes. Imagine, assume the price of Florida oranges widens due to nasty

weather or lousy harvest of fruit, vegetable. If oranges California is a close substitute for quality

and price, buyer needed for oranges will upsurge.

2.
Marginal analysis is an analysis of the affiliate prices and probable advantages of business

operations or fiscal decisions. The objective of marginal analysis is to conclude whether the costs

linked with a change in economic activeness support satisfactory advantages to atone.

Cost distinctness is the cost of purchasing enduring merchandises or particular inputs by its

nature manufacturing plant, specialized machinery and gear that cannot be used for other

intention or for trade. Sunk costs have no influence on marginal costs and interim decisions

about output.

The benefit of marginal product profitability analysis: Marginal profit is the supplementary profit

you will make from selling further products or services. You can compute your marginal revenue

by only determining the growing in total costs. Those numbers are often much facile to

recognize. Profit analysis helps you make a determination which item is most profitable to sell

next (CFO Perspective, 2019).

Depending on your decision, when the marginal benefit outweighs the marginal cost, you should

buy the item, operate, or make a change. By considering only changes in benefits and costs, you

determine how much or what you should add or change. If you are deciding or a decision, you

will usually consider all the benefits and costs, not just incremental changes.

Example, A-1 Paper produces 100 special boxes for a total cost of $ 2,200. A-1 Paper sells them

to specialty retailers for $ 30 each, for a total sale of $ 3,000. If it produced 110 boxes, its total

cost would be $ 2,500 and its total revenue would be $ 3,300. The additional cost to produce 10

additional boxes is $ 300, which equates to an added benefit of $ 300. Therefore, A-1 paper

should not produce extra boxes because marginal benefits do not exceed marginal costs.

3.
Opportunity cost is defined as the perceived benefits that a person overlooks when choosing an

allocation resources in one way instead of another. In economics, what matters is that it creates

possibilities examines the relative utility level of different goods and services [ CITATION Bri181 \l

1033 ]. For the concept of opportunity cost appears to require limited resources and the existence

of an alternative solution optional [ CITATION Woo13 \l 1033 ]. If these requirements are not met,

your opportunity costs the decision is always zero. However, these requirements often occur in

economics because of its nature is to study the use of scarce resources. This makes opportunity

cost a useful tool for facilitating a selection of maximizing utility from available alternatives

[ CITATION Woo13 \l 1033 ].

Opportunity cost is the cost you pay to do another job, assuming if you are going to start a

business you have to stop your job, so you will not win a salary, but you will make a profit from

business, so the salary you are losing is the opportunity cost, now if your net profit is higher than

the salary you will make the right decision, this is how we say opportunity cost helps in decision

making. Likewise, if a company wants to start producing its main input at a factory, it compares

it to the costs it receives from the supplier. Every action has a number of decision-making

opportunity costs.

In fact, individuals tend to ignore the opportunity cost. Psychological research shows that

consumer reviews and preferences tend to be based solely on pieces of information clear

statements [CITATION Fre09 \l 1033 ] showing gaps in our economic decision-making. [ CITATION

Fre091 \l 1033 ] implementation an experiment in which they assume the situations in which

participants want to buy different product categories (DVD, iPod or stereo). Same question for

both controls the only difference between the treatment group is the opportunity cost treatment

group clear statement. A simple opportunity cost reminder (in this case, save money other
purchases) lead to reduced purchasing decisions in the treatment group, showing that people

ignore opportunity costs. To conclude, whether it is a result related to money or time, people

tend not to consider opportunity cost.

4.

Deontological ethics concentrate on how actions are subject to certain ethical rules. Hence,

action is assessed rather than the aftermath of action. This is where the word "consequences"

comes from. So, if morals and duties exist, a consequential awareness of those actions is always

behind them. [ CITATION Imm64 \l 1033 ] expressed the concept of morality as the individual's duty

to do what is right. A bad outcome is the product of bad ethical choices based on human motives,

not results. So, he is proposing the best for everyone, remember that what's good for everyone is

good for society. To summarize Kant's vision, we must: 1. Act towards the common good. 2.

Treat others like family, in a simple and positive sense 3. Acting according to how you feel will

be best for humanity. There is no absolute right or absolute wrong. Intent and action lead to

consequences. Even a lie can be good if the motive is good. This is true for business owners. One

of the most effective exercises is to write down the 10 most important values that you will use to

guide yourself and your business in an ideal society. Most of the time, respect for human life,

honesty and fairness are chosen. If you can make objective choices, your employees cannot. If

you spot flaws in the process, then you have a problem and maybe your outfit identified the

problem before you, and that is why you are missing them. Principle or moral courage is of

utmost importance because when you have a moral conflict, only courage can bring you to a

discussion. Many examples have been reported in which morally perfect people act appropriately

under the pressure of corporate structure, power and politics. Sometimes, many businesses make

unethical requirements and say "no" poses a risk.

goodness of consequences and this is not necessary just a consequence but ignoring everything” [

CITATION Sen87 \l 1033 ] . After all, the world could be a better place if we all demanded our own

moral standards higher than ours other people. Therefore, the broader concept of consequences

that Sen likes to call a "consequence-based assessment". Consequentialism is sometimes

criticized for being difficult, or even impossible, to know the outcome of an action in advance.

Indeed, no one can predict the future with certainty. Also, in certain situations, the consequences

can lead to the opposing decision, although the consequences are considered good. For example,

suppose economists could prove that the world economy would be stronger and that most people

would be happier, healthier, and richer, if we were only 2% of the population. . enslaved. While

most people will benefit from this idea, most will never agree to it.

The ethical bias in business options or other open associations or groups (eg government) points

to the need to ensure that choices are the primary focus (colored options). green) has been done

and is set. Specifically, business options for central qualities must be established to indicate the

necessary objectives / needs used to meet and enforce the criteria used as part of the system. .

business options. This concentration of choice can influence selection criteria through a system

of business choices (green choice), directly affecting ethical choice and practice with authority.
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