Price Elasticity of Demand of Goods and Services
Need 2 questions by today friday 11/6/09 by midnight eastern standard time ohio time.
1. Describe and estimate the price elasticity of demand for a good or service of your company, or a company of interest to you. (Not your learning team good or service though!) ? Estimate the price elasticity of demand by guessing at the effect of a 10% price change on the sales level. Formulate how the assumed 10% price change and the change in sales level are the only two facts you need to estimate a price elasticity. ? Determine if the good or service tends to be elastic or inelastic, and the reasons why. ? Connect your estimate of price elasticity of demand to pricing decisions of the company: should it raise or lower prices so as to maximize total revenues? ? Speculate how our analysis changes if we are maximizing profits rather than revenues. ? Estimate the income elasticity of demand by guessing at the effect of a 10% income change on the sales level. Formulate how the assumed 10% income change and the change in sales level are the only two facts you need to estimate the income elasticity. ? Determine if the good or service tends to be an inferior good or a normal good; if a normal good determine if it is a necessity or a luxury; and finally, explain the reasons why.
Describe and estimate the production for a good or service your company produces (or a company of interest to you). ? Describe the product, typical volumes, and typical prices ? Describe the form of ownership of your firm: sole proprietorship, partnership, corporation, non-profit corporation, government enterprise, government agency, cooperative, association, franchise ? Describe the inputs used in the production process: buildings, equipment, vehicles, labor (specialized skills or unskilled), land, raw materials ? Describe the technology of the production process: automated or labor intensive, non-automated capital intensive, land intensive ? Define the short run and the long run by identifying the inputs (or input) that define(s) and give examples of increasing marginal returns and diminishing marginal returns. ? If you have time and interest: ? Describe the method of control of inputs in your chosen firm: hierarchy, team production, worker discretion, quantitative or qualitative goals (on intermediate measures (cost reductions, sales contacts, orders) or final output [profits, sales volume, total revenues), direct monitoring; Describe the kind and degree of departmentalization: functional, multidivisional, matrix ? Describe the degree of integration in the firm: vertical and horizontal ? Describe future trends in the technologies, input supplies, and organizational form for your chosen firm