Nowadays, more and more engineers are heading organizations as owner or Managing Directors, an engineer needs to be very efficient in engineering activity but in management too. The biggest failure of any firm has been the inability of its leader to read the business proposal correctly. This chapter focuses on formulating the correct approach in project planning and execution. A project consists of interrelated activities, which need to be executed to complete the entire task. The activities are interrelated and they need to be performed in a logical sequence to maximize the return. Step 1: Market Survey, Business Risk and Forecasting Step 2: Planning and Budget Preparation Step 3: Managing Finance Step 4: Arranging Inputs Step 5: Profit Maximization Step 6: Evaluation and Feedback7.58 ba x Fee i Price Elasticity of Demand Ep Price Elasticity of Demand—Simple Arithmetic Calculations Example 2 The demand lawis given by q=10-p near the point g =4 and p = Rs. 6. he pence hy Semis the per cent decrease in demand and hence an appro: lasticity of demand. Solution: At p = Rs. 6; price increases by 5%, hence increased price Rise in price = 6.30 — 6.0 = Rs. 0.30. Corresponding to this increased price, the new demand is q = 10 - 6.30 = 3.30 Decrease in demand = 3.30 - 4 = 0.7 Thus, we have, Rise in a = Fall in demand = 0.70, \|e,l = Percentage change in demand/percentage change in price % =35 Price elasticity is more than unit.Example 3 The price elasticity of demand for milk is equal to unity (= 1) and at the price of Rs. 35 per litre, a milk confectionery shop demands 70 litres milk If the price become Rs. 40 per litre, how much milk the shopkeeper will purchase if it does not intend to increase its expenditure on milk. Solution: Ifnew demand is q, _ New demand-old demand Old price New price-old price Old demand or, l= = , ~~ \40=B5 ° 70, or -q+70= 10 or, q=70-j0= So, the shop will purchas Lo tres of milk. Example 4 If the e, = 1, five kg of grapes are demanded at Rs. 80 per kg. At what price six kg of grapes will be demanded? Solution Let new price = p New demand-old demand | Old price New price-old price Old demand (i a= = * = 7) or, p-80=-16 or, p=-16 + 80 =64 So, at price of Rs. 64/kg, six kg of grapes will be demanded.Example 6 The price of g, increases from Rs. 60 per kg to Rs. 75 per kg. As a result, the demand for qg, increases What is the cross elasticity of demand of g, for q,* Solution: dp, = 75-60 =Rs 15 dg, = 10-7 =3 where dp, is change in price of q, and dq, is change in demand of 43 BE: jaa p,m is 7 7 = which is a positive quantity <. Commodities g, and qs are competitive. aateons le 8 When income of a household was Rs. 60,000 per month. It bought 20 litres of milk per month. When income increased to Rs. 75,000 per month, it purchased 24 litres of milk per month. Assuming no change in the price of milk, what is the income elasticity of demand for milk+ Solution: Income elasticity of demand as e, is measured with the help of following formula: dq_y &=— ke Td ¢ where dq = change in demand dy = change in income y= original income q = original demand ee 0, 60000 '5000 — 60000 * 20 Income elasticity oF demand is positive, $0 it is a normal good and it is less than unity, so, a necessity good.Example 10 A mall owner is takin; x1 3 lakh 3.12 lakh X2][ 5 takh |20 lakh Find out their advertisement elasticity and nature of commodities XY; and X. . Change in demand Solution: — e, for X, = — Change in amount of money spent on advertisement Original amount of money spent on advertisement 3) 312-31 % x 50 75-50 *3 (770 — 500) 50 éa for X= 530) * 300 = 10.8 x 0.1 = 1.08 Advertisement elasticity for commodity X, is less than one and for commodity X3, it is more than one. Commodity X is luxury, may be used by young people, who are more influenced by advertisement whereas X; is a necessary commodity.