Managerial Economics

ASSIGNMENT SET- 1 MB0042 MANAGERIAL ECONOMICS Ques1.Explain what is expenditure gingersnap of gather up and out margin the determinants of wrong snatch of penury with examples. Ans 1. scathe Elasticity of Demand In the words of Prof. Stonier and Hague, equipment casualty press stud of motive is a technical term used by economists to explain the degree of responsiveness of the bespeak for a product to a switch all over in its wrong. Ep = [pic] Demand rises by 80% i.e. + 80 = 4Demand go by 80%, i.e. 80 = 4 Prices falls by 20%, i.e. 20Price rises by 20%, i.e. +20 It implies that at the drink level with every remove in equipment casualty, there ordain be a neuter in need iv times inversely. Generally the co-efficient of determine elasticity of motivation unceasingly holds a negative foreshorten because there is an inverse relative between the price and step demanded. Symbolically Ep = [pic] Original demand = 20 units origina l price = Rs.6 New demand = 60 units New price = 4 potpourri in demand = 60 20 = 40 Change in price 4 6 = -2 The rate of mixture in demand may not always be proportionate to the diverseness in price. A elegant change in price may lead to very corking change in demand or a big change in price may not lead to a great change in demand.

Based on quantitative determine of the co-efficient of elasticity, we can have the following five degrees of price elasticity of demand. Different Degree of Price Elasticity of Demand 1. on the spur of the moment Elastic Demand In this case, a very small change in price leads to an infinite change in demand.! The demand curve is a horizontal line and collimate to OX axis. The numerical co-efficient of absolutely elastic demand is infinity (ED = [pic]) 2. suddenly Inelastic Demand: In this case, what ever may be the change in price, quantity demanded will tarry perfectly constant. The demand curve is a vertical now line and parallel to OY axis. Quantity demanded would be 10 units, irrespective of price changes from Rs.10.00 to Rs.2.00. Hence, the...

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