BBEK1103.docx - BBEK1103 OUM BUSINESS SCHOOL SEPTEMBER 2016 BBEK1103 PRINCIPLE OF MICROECONOMICS MATRICULATION NO IDENTITY CARD NO TELEPHONE NO E-MAIL

BBEK1103.docx - BBEK1103 OUM BUSINESS SCHOOL SEPTEMBER 2016...

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BBEK1103 OUM BUSINESS SCHOOL SEPTEMBER / 2016 BBEK1103 PRINCIPLE OF MICROECONOMICS MATRICULATION NO: IDENTITY CARD NO. : TELEPHONE NO. : E-MAIL : LEARNING CENTRE :
BBEK1103 TABLE OF CONTENTS Page Cover Page - Table of Contents - 1.0 Elasticity concept 1-6 1.1 Price Elasticity Demand 1.2 Cross Elasticity of Demand 1.3 Income Elasticity of Demand 2.0 Who Actually Bears The Burden Of Taxes 7-13 3.0 Who Actually Receives The Benefits Of Subsidies 14-18 4.0 Conclusions 19-20 References 21
BBEK1103 1.0 Elasticity concept Elasticity is a method used to measure degree of responsive unit of economy (users and firms) against the quantity of the demand and supply of goods when there are changes in the variable or the factor that influence the quantity of demand and supply for the goods. The elasticity concept that closely related to the users is the elasticity of demand. The elasticity concept for firms will be elasticity of supply. Elasticity of demand divided into three types based on the changes of few of the variables which influence the demand of the goods as follow: a) Price elasticity demand measures the effect of changes in the price of goods towards the amount of quantity demanded b) The effect of differences in the user’s income towards the demands of goods known as income elasticity demand c) Cross elasticity of demand measures the effect of price changes of other goods, such as substitute goods towards the demand for the particular good. 1.1 Price Elasticity Demand Price elasticity of demand can be define as a measurement of responsive degree or the differences in the quantity demanded as a result from the effect of the prices changes of the particular good. It is also referred to the percentages of quantity demanded as result from one percent of price change for the goods. The value of elasticity can be calculated using the following elasticity coefficient formula (E d ): E d = percentageofch angeinquantitydemanded percentageofchangeinprice The coefficient value of the price elasticity demand can be classified into five types which is elastic, inelastic, unitary elastic, perfectly elastic and perfectly inelastic. a) Elastic Demand 1

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