3. What are the determinants of price elasticity of demand? [10]
For some products buyers are price sensitive (products are elastic), and for some products buyers are not price sensitive (products are inelastic). People are very sensitive to one products price change if the product has a similar product in the market. But sometimes when the price of a motor bike increases by 15%, the consumers are affected by it, but on the other hand when price of salt increases by 20% people aren’t affected by that much. The price elasticity of demand is determined by many factors.
I. The availability of close substitute.
When the product has many close substitutes in the market the price tends to be sensitive (i.e.) people will react if one product’s …show more content…
Income level
The elasticity of demand also will be affected by income of the people. The rich person tends to have a more inelastic demand, pretty much in all products, because they don’t care about the price level. They are able to afford any product comfortably. However the case is different for poor and average people. Their demand tends to be elastic. For the very people even the necessity products also turns out to be elastic. These are most poor people in the economy.
4. Identify the guidelines for forecasting demand of new products.[10]
Demand forecasting means identifying or measuring the possible demand for a new product which is going to be released into the market. Forecasting the demand for a new product is a challenge. There are certain ways to measure or forecast the demand for a new product.
I. Number of close substitutes
If there are lots of substitute products in the market then it is very clear that finding demand for the new product would be very tough. As there would be brand loyal customers, low priced product buyers etc. then it is very clear that demand for the new product is going to be very low in the short …show more content…
At price below MVR 1 ben doesn’t supply at all. But when the price starts to increase starting from MVR 1 Ahmed starts to supply more and more at higher prices. This is the Supply Schedule, a table which demonstrates or shows the connection or relationship between a product’s price and the quantity being supplied. The graph on the right side demonstrates the table given perfectly. At different prices how the supply has been affected can be seen through the graph very nicely and effectively. The line which is in the graph is called the supply
For some products buyers are price sensitive (products are elastic), and for some products buyers are not price sensitive (products are inelastic). People are very sensitive to one products price change if the product has a similar product in the market. But sometimes when the price of a motor bike increases by 15%, the consumers are affected by it, but on the other hand when price of salt increases by 20% people aren’t affected by that much. The price elasticity of demand is determined by many factors.
I. The availability of close substitute.
When the product has many close substitutes in the market the price tends to be sensitive (i.e.) people will react if one product’s …show more content…
Income level
The elasticity of demand also will be affected by income of the people. The rich person tends to have a more inelastic demand, pretty much in all products, because they don’t care about the price level. They are able to afford any product comfortably. However the case is different for poor and average people. Their demand tends to be elastic. For the very people even the necessity products also turns out to be elastic. These are most poor people in the economy.
4. Identify the guidelines for forecasting demand of new products.[10]
Demand forecasting means identifying or measuring the possible demand for a new product which is going to be released into the market. Forecasting the demand for a new product is a challenge. There are certain ways to measure or forecast the demand for a new product.
I. Number of close substitutes
If there are lots of substitute products in the market then it is very clear that finding demand for the new product would be very tough. As there would be brand loyal customers, low priced product buyers etc. then it is very clear that demand for the new product is going to be very low in the short …show more content…
At price below MVR 1 ben doesn’t supply at all. But when the price starts to increase starting from MVR 1 Ahmed starts to supply more and more at higher prices. This is the Supply Schedule, a table which demonstrates or shows the connection or relationship between a product’s price and the quantity being supplied. The graph on the right side demonstrates the table given perfectly. At different prices how the supply has been affected can be seen through the graph very nicely and effectively. The line which is in the graph is called the supply