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Unit II - Essay - MBA 6053 - B George.docx - 1. Research...

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1.Research elasticity information for two particular goods: one with an elastic demand andone with an inelastic demand. Using elasticity information, you gather, predict changes indemand. TheUnited States Department of Agriculture websitehas a good resource tohelp with this.in
Demand is known to bePrice Elasticwhen a change in price causes a bigger percentage changein demand. Elastic demand will have a Price Elasticity of Demand (PED) of greater than one(PED > 1).Taking the example of apples for Elastic demand, in India the prices of apple varygeographically. A study shows (Monica Jain. 2011.) that wholesale price for apples in Delhi andChennai are 27.83 and 59.49 respectively in January. Whereas, the prices in October fall to 25.68and 36.40 respectively. The price is higher in January because of higher storage costs, the pricesare lower in the harvest month October comparatively. Retailers buy it on higher prices butpeople tend to buy the apples in October and following months because of low prices, and switchto substitute products (Mangoes, Peaches, Bananas etc.) in other months when apple prices arehigher. Therefore, an increase in the prices will decrease the sales and vice versa. Hence, theprice is elastic and it proves the following relationship:Price IncreaseRevenue DecreasePrice DecreaseRevenue IncreaseReferencesJonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift inthe Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, InternationalAssociation for Energy Economics, vol. 29(1), pages 113-134. citation courtesy ofWeiwei Liu 2016.“Estimating the Elasticities of Gasoline Demand: An InstrumentalVariable Approach”Department of Economics, Saginaw Valley State University, UniversityCenter, MI, USAMonica Jain, 2011.

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Term
Spring
Professor
Miss.Ifrah

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