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Managerial Economics

# Managerial Economics

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analsis of elasticity of demand
analsis of elasticity of demand

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03/28/2013

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MANAGERIAL ECONOMICSMANAGERIAL ECONOMICS
Guided By: Prof. M. DashGuided By: Prof. M. DashPresented By: Group Four Presented By: Group Four

According to Point ElasticityAccording to Point Elasticity
No. of the student in the school = 6000 (Q1)No. of the student in the school = 6000 (Q1)Tuition fee in the school = Rs. 150,000 (P1)Tuition fee in the school = Rs. 150,000 (P1)Tuition fee increased by 25 %Tuition fee increased by 25 %Therefore, tuition fee after hiking = Rs. 187,500 (P2)Therefore, tuition fee after hiking = Rs. 187,500 (P2)No. of the students in the school after hiking fees = ??No. of the students in the school after hiking fees = ??(Q2)(Q2)Price elasticity of demand = -1.2 (ep)Price elasticity of demand = -1.2 (ep)Their present resource pool = Rs. 90croresTheir present resource pool = Rs. 90croresTheir estimated resource pool = Rs. 112.5croresTheir estimated resource pool = Rs. 112.5crores

As we know that,As we know that,dQ/dP . P/Q = epdQ/dP . P/Q = epTherefore, dQ/37500 . 150000/6000 = -1.2Therefore, dQ/37500 . 150000/6000 = -1.2dQ = -1800dQ = -1800Therefore, no. of students after hiking the feesTherefore, no. of students after hiking the fees= 6000-1800 = 4200 (Q2)= 6000-1800 = 4200 (Q2)Therefore, after revenue would beTherefore, after revenue would be4200 x Rs. 1875004200 x Rs. 187500Rs. 78.75croresRs. 78.75crores