Assignment - Economic Tools
Formulate a hypothetical problem and analyze or show how you would solve this problem using the FIVE economic tools from your textbook. Be very explicit in your analysis. Assume you are presenting this to your Board. First, define your demand function and explain the variables. Also explain the market elasticity of your product.
The Five Economic tools are:
Supply and demand
Regression analysis
Elasticity
Marginal analysis
Forecasting
Supply and demand analysis is used to react to different determinants that change equilibrium price and quantity.
Regression Analysis is used by providing managers information they need to apply economic theory to real world decision making by determining how one or more explanatory variables affect the value of a dependent variable using statistics.
Elasticity helps managers estimate sales by determining the responsiveness or sensitivity of consumers to changes in the price.
Marginal Analysis is used by managers to determine the optimized profit/profit maximization for a business. This process involves changing the value of a choice variable by incremental amounts to see if the objective function can be further increased. This analysis can also be used to minimize an area of the business.
Forecasting collect data using techniques of estimating demand functions in an attempt to forecast sales and prices.