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Economics Assignment

Economics Assignment

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Published by Komal Shujaat
Economics Assignment
Economics Assignment

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Published by: Komal Shujaat on Jul 23, 2013
Copyright:Attribution Non-commercial


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Economic Analysis (522) First Assignmen
Q.1 Write one page comprehensive note on each of thefollowing:Ans.D
Demand is the power to purchase a product coupledwith willingness to purchase it. The law of demandstates that when the price of a good increases, thequantity demanded of it falls and
vice versa
. Thephenomenon of demand elasticity refers the level of change in quantity in response to change in price.Economists define the demand elasticity as:“The degree of responsiveness in the demandfor a good to a change in its price.”For example a person who has a lot of income, hisdemand will be less elastic while the low incomeperson’s demand will be elastic. So with demandelasticity we find about the impact of a price change ontotal revenue. Demand is elastic if a price reductionincreases total revenue. Demand is inelastic if a pricereduction decreases total revenue and in the unitelastic case, a price change has no effect on revenue.
Ejaz Alam Khan - H 5279752 # 1
Economic Analysis (522) First Assignmen
Demand which is the amount of a commodity thatpeople are willing to buy over a given period of timeand the law of demand states that if price of acommodity is raised, its demand will be lowered, otherthings being equal. Similarly, a decline in price willincrease the demand for the good. Demand forecastingrefers to look into the future by using the estimatedhistorical data for the purpose to determine thedemand. Under ordinary circumstances. The forecastsdo a fairly good job of illuminating the road ahead. Atother times, particularly when there are major policychanges, forecasting is a hazards.Economics has a very powerful tool for explainingchanges in the economic environment. Theory of supply and demand shows how consumer preferencesforecast consumer demand for commodities, whilebusiness costs are the foundation of the supply of commodities market price is determined makingdemand or supply curves.
Ejaz Alam Khan - H 5279752 # 2
Economic Analysis (522) First Assignmen
Supply is the quantity of out put brought for sale in themarket at a certain price. By elasticity of supply wemean that ratio at which supply changes due to changein price level. So we can say that “the degree of change or responsiveness of the quantity supplied inrelation to a change in price is called supply elasticity”. The major factor influencing supply elasticity is theease with which production in the industry can beincreased. If all inputs can be readily found at goingmarket price, then out put can be greatly increasedwith little increase in price. This would indicate thatsupply elasticity is relatively large. Another importantfactor in supply elasticity is the time period underconsideration. A given change in price tends to have alarger effect on amount supplied as the time forsuppliers to respond increases.
Ejaz Alam Khan - H 5279752 # 3

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