capital income of consumers and promotional expenditure of Maa mustard oil is zero. ✓ For a percentage change in quantity demanded of Maa mustard oil, its price should decrease by 136.62 times. ✓ For a percentage change in quantity demanded of Maa mustard oil, the price of competitor's products should increase by 117.41 times. ✓ For a percentage change in quantity demanded of Maa mustard oil, the per capital income of consumers should decrease by 0.2823 times. ✓ For a percentage change in quantity demanded of Maa mustard oil, its promotional expenditure should increase by 7.87 times. Price Elasticity of Demand PED= Slope *P/Q Slope = -136.62 (for demand) P=91.38 (Value taken from Exhibit 5) Q=13,256 (Value taken from Exhibit 5) A) Price Elastic Demand (PED) PED =136.6167*(91.38/13,256) = 0.94175 ( Values taken from Exhibit) When the demand is inelastic (0<PED<1). The price changes don’t have any impact on the quantity demanded. B) Income elasticity of Demand (IED) IED=-0.28234393*(7545.15/13,256) = -0.16070 ( Values taken from Exhibit 2,5) The mustard oil is an inferior good (IED <0). When the income is increasing the consumer tends to avoid these goods. C) Cross Price Elasticity of demand CPED=117.4*(109.14/13256) =0.96658 ( Values taken from Exhibit 3,5)
A3) Since the demand for Hind Mustard oil is inelastic to price. Which means for increase in the price , total revenue increases and for decrease in the price , total revenue decreases(i.e.). They are directly proportional to each other. Inelastic % change in Qd is less than % change in P • A given % rise in P will cause a smaller % fall in Q so that total revenue (P times Q) rises.
- Spring '18
- Supply And Demand, price of oil