BUSINESS MANAGEMENT

Business Management



Business Management

Question 1

QD =12.4- P

QS = (P + 2.6)/2

We obtain the quantity demanded and quantity supplied using the following table.

Price

QD

QS

1

11.4

1.8

2

10.4

2.3

3

9.4

2.8

4

8.4

3.3

5

7.4

3.8

6

6.4

4.3

7

5.4

4.8

8

4.4

5.3

9

3.4

5.8

10

2.4

6.3

11

1.4

6.8

12

0.4

7.3

13

-0.6

7.8

14

-1.6

8.3

15

-2.6

8.8

After finding the values, we would plot the demand and supply function.

Equilibrium Price = $ 7.4

Equilibrium Quantity = 5.3 bushel

The actual price would not be equal to the equilibrium price in reality, because of the imperfection in the market. It is only possible in a perfect competition, which does not exists in reality.

The equilibrium price is that which equalizes the demand and supply. If the equilibrium price is not reached, there is a demand or excess supply. But that price is at the intersection of the supply and demand balances the interests of buyers and sellers when the supply of goods and services is equivalent to the demand for them. Price equilibrium price that balances supply and demand. Equilibrium quantity: quantity supplied and demanded when the price has been adjusted to balance supply and demand.

The equilibrium price, the amount of good that buyers are willing and able to buy is exactly equal to the quantity sellers are willing and able to sell. At this price all market participants are satisfied: buyers have bought everything you wanted to buy and sellers have sold everything they wanted to sell. The actions of buyers and sellers naturally lead to the markets to balance supply and demand.

Question 2

The elasticity of demand to price is an important concept in economics. It is a practical application in economics, finance and marketing. The interpretation has the merit of simplicity: an elasticity of -2 means that if we increase the price of a 1% decline the application of 2%. Elasticity is an important element in determining the price that best suits the application for a product. In other words, if the price rises or falls by a certain percentage, the elasticity of response is the criterion for the reduction or increase in demand. And if the volume of demand has changed to a smaller percentage compared to the price, it is assumed that demand is inelastic (insensitive). Conversely, if a smaller percentage change in price leads to a greater percentage change in demand, the latter is elastic (sensitive).

Since the demand of the product is price inelastic, as it is -0.5, so lowering of the price would not have effect on the sales of the item. So the perception of the Haas Corporation's executive vice president is wrong, as in the case of inelastic price demand, the change in price won't have any effect on the demand of the product. Hence the company should not lower the prices of its products.

The president is also wrong, because of the above reason.

Question 3

P X * Q X + P Y * Q Y = B ,

Where, P Y and P X is the prices of good y and good x respectively; Q X and Q Y is the quantity of the good X and good Y ...