Question 1 (Marks: 55)
You are an Economics consultant at Economics 4U, a small consulting firm that helps its clients to use Economics knowledge for better business decision-making. You have been approached by a new client, Mr. PD Smith, a product manufacturer, to conduct research on the price elasticity of demand, income elasticity of demand and the price elasticity of supply for his product category. The manufacturer would like to obtain a better understanding of the concept of elasticity and how to use this knowledge to make better strategic decisions about his product.
Present your findings in a report that provides the following information:
Explain the purpose of your report and identify the product you have chosen (Provide a brief explanation of the product category if it is one that is not well known). (+- ¼ page)
• The Concept of Elasticity
Explain the general concept of elasticity and how it can be applied to improve the decisions made about a product. (+- ¼ page)
Price elasticity of demand
Identify the price elasticity of demand coefficient for the product (based on your own research) and explain what it reveals about the product. Also identify and discuss the factors that have determined that particular elasticity coefficient. Use a graph to illustrate the relevant category of price elasticity of demand. (+- 2 pages)
Price elasticity of demand and total revenue
Advise the product manufacturer as to how to increase total revenue for the product. (+- ¼ page)
Income elasticity of demand
Identify the income elasticity of demand for the product (based on your own research) and explain what the elasticity coefficient reveals about the product. (+- ¼ page)
Price elasticity of supply
Identify the price elasticity of supply coefficient (based on your own research) and explain what it means. Also explain the factors that have determined this particular elasticity coefficient. Use a graph to illustrate the relevant category of elasticity of supply. (+- 1 page
Provide a suitable conclusion that sums up the key findings of your report. (+- ¼ page)
Question 2 (Marks: 45)
MR PD Smith has heard that the government has proposed the imposition of a maximum price or price ceiling in the market for his product. He does not understand the implications of this proposed price ceiling on equilibrium in the market and has asked you to provide some clarity.
The manufacturer would like to know the following:
• What is a price ceiling and why would the government want to impose a price ceiling? (+- ¼ page)
• What impact would the imposition of the price ceiling have on equilibrium in the market? Please explain the impact on equilibrium with the aid of a graph.(+- 1 page)
• Is there a possibility that the price ceiling could have no impact on equilibrium in the market? (+- ¼ page)
• Would society be better or worse off if the price ceiling was imposed in the market? Please explain with the aid of a graph.(+- 1 page)
• Is there a better alternative to imposing a price ceiling? (+- ¼ page)
• Please provide an example of another industry or market where price ceilings were historically applied and explain whether the imposition of the price ceiling was beneficial for that market. (+- ½ page)
Get Answers on Above Questions on Economics
Answer 1: The concept of elasticity is defined as the analysis of sensitiveness of one economic factor in comparison to another. In terms of economics, it is defined as change in behaviour of buyers and sellers as against the changes in the price of goods and services. The main purpose of this report is to analyse a product in order to understand the concept of elasticity. The product selected is cars.
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