Assignment:
Topics
Elasticity, Inelastic and Elastic Demand (and Supply), Unit Elasticity
Introduction
In this paper, you will apply what you have learned to the firm or business you selected in order to see how the concepts can be applied to a business situation.
Keep in mind that throughout this course, papers are intended to bring real-world situations to the course material that we are covering each week. Part of your grade will depend on the connections you make between your chosen firm (which could include the economic environment of your chosen firm, the markets in which your chosen firm interacts with outside actors, the decisions your chosen firm makes, etc., depending on the particular question), the material from the chapters we covered in the week, and, when applicable, your own experience.
Activity Instructions
In this paper, explore and explain how your chosen business could use the idea of elasticity to make more informed decisions. For instance, we learned that if the price of a good drops, the quantity demanded increases. However, a business needs more information than that to make a good decision-by how much the quantity demanded increases is very important to know; the price elasticity of demand can be used to estimate the change in quantity demanded.
Several questions to consider: does your firm sell related products for which a cross-price elasticity of demand would be useful to know? Do competitors change the prices of their goods, and how could our business use elasticities to determine a best response to such a price change? Also remember that we could put other economic variables in the elasticity equations-we could discuss the advertising elasticity of demand, for instance, which would estimate by what percentage the quantity demanded would change for a certain percentage change in the amount of advertising (and then we could use the idea of comparing marginal benefit with marginal cost to see whether we should increase advertising).
Also-while I do not expect you to have specific values for elasticities as an outsider to the firm (if you were working for the firm, you would-or could-have those values), what do you think the elasticities you included in your paper would be-elastic, inelastic, strongly elastic, or strongly inelastic? Why?
Writing Requirements (APA format)
1.5 to 2 pages (approx. 300 words per page), not including title page or references page
1-inch margins
Double spaced
12-point Times New Roman font