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# Assignment - MB0026 Managerial Economics

MB0026

Managerial
Economics

Submitted by:
Sreeja .T

Submitted By: Sreeja. T Page 1 of 8

a) Here given Q1=100-6P1-4P2+2P3+0.5-15 = 1.003(8000)) = 30 – 24 = 6 %change in quantity of price good 2 Q = 16.5 Cross elasticity = (Δ) Quantity of good1&2 * Price of Q2 (Δ) Price of good1& 2 Q of good1 Submitted By: Sreeja. Ans: A cross elasticity is the effect on the change in demand or supply of one good as a result of a change in something related to another product The cross price elasticity of product A with product B is: (ΔQA/QA)/(ΔPB/PB) Where QA is the quantity sold of A. P2 =16.003Y P1 =7. ΔQA is the change in the quantity of A sold . T Page 2 of 8 . P3 =4 Y=8000.5 (ΔQ/Q) = 6/1.5)+2*4+0.003Y WHERE P1 and Q1 are the price and quantity values of good 1 P2 and P3 are the prices of good 2 and good 3 and Y is the income of the consumer. Q1 =30 % change in quantity of good 1 & 2 = ΔQ ΔQ = Q1 –Q2 = 30 – (100-6(7)-4(16.5(Since there is 10%increase for good2). The initial values are given: P1 =7 P2 =15 P3 =4 Y=8000 Q1 =30 You are required to: a) Using the concept of cross elasticity determine the relationship between good 1 and others b) Determine the effect on Q1 due to a 10 % increase in the price of good 2 and good 3. Assignment .PB is the price of B and ΔPB is the change in the price of B.MB0026 Managerial Economics Assignment 1 The demand function of a good is as follows: Q1=100-6P1-4P2+2P3+0.

Assignment .003y P2 and p3 are prices of good 2 and good 3. Demand curve can be defined as the graph depicting the relationship between the price of a certain commodity. p3=4.5 * 30 = 2 b) Determine the effect on Q1 due to a 10 % increase in the price of good 2 and good 3.8 1.MB0026 Managerial Economics = 6 * 15 1. What are the factors that determine the Demand curve? Explain.8 Change in price of goods =4.4=0.5) +2(4.003(8000) =30.e. Q3 = 30. It is a graphic representation of a demand schedule.4 Then Q1=100-6(7)-4(16. Demand curves are used to estimate behaviors in competitive markets.4) +. Submitted By: Sreeja.4 * 4/30= 0.4 Cross elasticity = 0. when 10% increase in price P2 and P3 will be p2=16.8=0.5. and are often combined with supply curves to estimate the equilibrium price (the price at which sellers together are willing to sell the same amount as buyers together are willing to buy.0.003(8000) = 24. T Page 3 of 8 .8/0. also known as market clearing price) and the equilibrium quantity (the amount of that good or service that will be produced and bought without surplus/excess supply or shortage/excess demand) of that market. The demand curve for all consumers together follows from the demand curve of every individual consumer: the individual demands at each price are added together.4) +0.4 .2 Here the effect on Q1 due to 10% increase in the price of good2 and good 3 Q1=100-6p1-4p2+2p3+0.8 I. Cross elasticity = (Δ)Quantity of good1 and good3 * Price of good3 (Δ) Price of goods Quantity of good1 % change of good1 and good3:=100-6(7)-4(15) +2(4.8 So Change in quantity of good1 and good3 = Q1-Q3=30-30. and the amount of it that consumers are willing and able to purchase at that given price.

tomato sauce) shifts in (i. that is. Assignment . weather could be factor in the demand for beer at a baseball game. Some of the more important factors are the prices of related goods (both substitute and complementary). However. A firm supplied 3000 pens at the rate of Rs 10. when the price of a good (e. Elasticity = 2000 * 10 12 3000 Submitted By: Sreeja. chicken) shifts out. there is more demand for substitute goods as they become more attractive in terms of value for money. Here Elasticity = change in supply * original price Change in price original supply Change in supply = 5000 – 3000 = 2000 Change in price = 22 – 10 = 12 I. while demand for complementary goods contracts in response to the contraction of demand with the underlying good) 2.MB0026 Managerial Economics The demand curve usually slopes downwards from left to right. as demand is the willingness and ability of a consumer to purchase a good under the prevailing circumstances.g. the demand curve for normal goods shifts out as more will be demanded at all price levels. which means people will buy more of a service. while the demand curve for inferior goods shifts in due to the increased attainability of superior substitutes. The negative slope is often referred to as the "law of demand".e. it has a negative association. a hamburger) rises. Find the elasticity of supply of the pens Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in a good’s price. while the demand curve for complementary goods (e. When income rises. product. the demand curve for substitute goods (e. As an example. or resource as its price falls. Next month. income. due to a rise of in the price to 22 Rs per pen the supply of the firm increases to 5000 pens.e. so any relevant circumstance can be a non price determinant of demand. resulting in a new demand curve. With respect to related goods. population and expectations.g. The shift of a demand curve takes place when there is a change in any non-price determinant of demand. T Page 4 of 8 .g.