Assignment:
A company Plans to increase Total Revenue by altering their price. They know the matter is not a straightforward issue as it involves analysing the Price Elasticity of Demand.
Should the company increase / decrease their price if:
Q1: the Price Elasticity of Demand = 2.5?
Q2: the Price Elasticity of Demand = 0.8?
Q3: the Price Elasticity of Demand = 1?
(NOTE: For Q1 - Q3, answers must be fully illustrated with graphs to justify the answers)
Q4: What factors will influence the value of the Price Elasticity of Demand?
A customer of the company buys 100 pieces of X when its price was $8 each. When the price rises to $10 each, the customer pulls back and only buys 40 pieces.
Q5: what is the Price Elasticity of Demand?
Q6: How would you describe this customer profile?
Q7: Assume that the customer buys MCI pieces of X when the price of Y was $5 each. If the price of Y rises to $7, how many pieces of X would he buy if the Cross-Elasticity between X and Y = 3.2?
08: How would you describe the relationship between X and Y if the Cross Elasticity is:
a) Positive?
b) Negative?
c) Zero?
Based on your economic analysis of the above matter, prepare a 1,200-word report using the following structure / outline:
- Purpose
- Method
- Results
- Discussion
- Recommendations