...Assignment 2: Utility, Elasticity, and Demand M2:A2 8/20/2013 ECO 202 Sherrice Hodge Sherrice Hodge ECO 202 M2:A2 8/20/13 I have been placed in charge of designing a product campaign for a new shampoo called Lovely Hair, which must include the components of marketing, pricing, and distribution. The ultimate goal of this campaign is to provide affordable hair care to every woman in order to make them feel gorgeous and confident outside as well as within. Lovely Hair is the secret to having irresistibly soft and shiny hair accompanied with an alluring fragrance so your beauty can shine every day. Lovely Hair is manufactured by Beautiful People and Lovely Hair products can be found in mass merchandise stores, supermarkets, and drug stores and online as well. Lovely Hair’s mission is to make every woman feel like the goddess that they are, by making her hair delicately smooth and soft with a scent so entrancing. We want women to feel ravishing and confident within their skin and encourage them to confess their beauty each and every day. Lovely Hair can provide the best natural hair care ingredients in order to completely satisfy your every need. We took the time to research what our hair needs in order to be healthy and strong and to make sure that we provide a safe product that women can enjoy. Even our packages are made out of recyclable materials to keep the environment safe. In order to achieve the ultimate goal of this campaign, I have broken down my strategy...
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...Chapter 5: The Demand for Goods Multiple Choice Questions THE DETERMINANTS OF DEMAND 1. Status and ego considerations in consumption are: A) Sociopsychiatric explanations of demand. C) An example of income. B) Economic determinants of demand. D) All of the above. Answer: A Type: Basic Understanding Page: 93 2. A movement along a given demand curve between two prices refers to: A) The price elasticity of demand. C) A change in quantity demanded. B) A change in demand. D) The law of diminishing marginal utility. Answer: C Type: Definition Page: 94 3. When the demand for a good increases: A) Consumers are willing and able to pay only lower prices for any given quantity of the good. B) Consumers desire to have more of the good. C) Consumers are willing and able to purchase greater quantities of the good at any given price. D) There is movement along the demand curve. Answer: C Type: Definition Page: 94 THE DEMAND CURVE 4. Utility refers to the: A) Satisfaction obtained from a good or service. B) Additional satisfaction obtained from one more unit of a good or service. C) Willingness to buy specific quantities of a good or service at a particular price. D) Decrease in satisfaction as more of a good or service is consumed. Answer: A Type: Definition Page: 95 5. Which of the following determinants of demand is most directly an indication...
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...Chapter 5: The Demand for Goods Multiple Choice Questions THE DETERMINANTS OF DEMAND 1. Status and ego considerations in consumption are: A) Sociopsychiatric explanations of demand. C) An example of income. B) Economic determinants of demand. D) All of the above. Answer: A Type: Basic Understanding Page: 93 2. A movement along a given demand curve between two prices refers to: A) The price elasticity of demand. C) A change in quantity demanded. B) A change in demand. D) The law of diminishing marginal utility. Answer: C Type: Definition Page: 94 3. When the demand for a good increases: A) Consumers are willing and able to pay only lower prices for any given quantity of the good. B) Consumers desire to have more of the good. C) Consumers are willing and able to purchase greater quantities of the good at any given price. D) There is movement along the demand curve. Answer: C Type: Definition Page: 94 THE DEMAND CURVE 4. Utility refers to the: A) Satisfaction obtained from a good or service. B) Additional satisfaction obtained from one more unit of a good or service. C) Willingness to buy specific quantities of a good or service at a particular price. D) Decrease in satisfaction as more of a good or service is consumed. Answer: A Type: Definition Page: 95 5. Which of the following determinants of demand is most directly an indication...
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...along the demand curve. D. the quantity of gasoline supplied to move in along the supply curve. 2. Suppose the price of tomatoes dramatically increases. Which of the following could cause this change? A. Hurricanes during the late summer damages the Florida crop, shifting supply left B. A reduction in tariffs of tomatoes from Central American, shifting supply right C. A news report stating that a pesticide used on tomatoes might cause cancer, shifting the demand to the right D. Advertising for catsup increases demand for catsup, shifting the demand curve to the left 3. An increase in price and decrease in quantity are consistent with a: A. leftward shift in demand and no shift in supply. B. leftward shift in supply and no shift in demand. C. rightward shift in supply and a rightward shift in demand. D. rightward shift in supply and a leftward shift in demand. 4. An increase in quantity and an indeterminate change in price are consistent with a: A. leftward shift in demand and supply. B. rightward shift in supply and demand. C. rightward shift in supply, keeping demand constant. D. rightward shift in demand, keeping supply constant. 5. Suppose caviar sales soars at the same time price increases. What would lead to both a higher quantity sold and higher price of caviar? A. A shift in demand to the right and a larger shift in supply to the right. B. A shift in demand to the left and a smaller shift in supply to the left. C. A shift in demand...
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...Consumers [Consumer Choice & Elasticities] (Section 6) I. Definitions Utility [Felicity] (Satisfaction)- The benefit or satisfaction a person gets from a choice or action Marginal Utility (MU)- The additional utility someone gets from consuming an additional unit of a good. Marginal Utility Formula = ∆ Total Utility ∆ Quantity Law of Diminishing Marginal Utility- As someone consumes more of a good marginal utility will eventually decline (as consume more the increase in utility will be smaller each time) ExsMarginal Benefit (MB)- Maximum price a consumer is willing to pay for an additional unit of a product. The dollar value of a consumer’s utility of consuming an additional unit: So it f______ as consumption increases 1 II. The individual: Demand curve & consumer choice Marginal Benefit reexamined What does it really mean if a consumer is willing to pay up to (at most) $10 for an additional unit of the product. Marginal Utility per $ spent: MU Good A Price of good A Interpret: MU A P A Ex: Buying one more burrito (from 1 to 2) gives you an ↑ in utility of 10 & costs $5 2 A. Deriving a demand curve for slices of pizza for Carlos Slices 0 1 2 3 4 5 6 7 8 9 10 Total Utility 0 200 390 570 740 900 1030 1130 1200 1240 MU if P MU X 200 P=$2 MU if P P=$1 MU if P P=$0.50 10 Cheeseburgers That cost $0.50 Total Utility 130 240 340 430 505 555 580 595 605 610 Slices 1 2 3 4 5 6 7 8 9 10 MU 130 MU P Carlos’...
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...Microeconomics * Elasticity * Price Elasticity of Demand * a measure of the responsiveness of quantity demanded to changes in price * addresses the percentage change in quantity demanded for a given percentage change in price * Coefficient of price elasticity of demand (E sub d) = Percentage Change in Quantity Demanded/ Percentage change in price * From Perfectly Elastic to Perfectly Inelastic Demand * Ed > 1 = Elastic * Ed <1 = Inelastic * Ed = 1 = Unit Elastic * Ed = Infinity = Perfectly Elastic * Ed = 0 = Perfectly Inelastic * Elastic Demand and Inelastic Demand * Elastic Demand: If the numerator (percentage change in quantity demanded) is greater than the denominator (percentage change in price), the elasticity coefficient is greater than 1 and demand is elastic * Inelastic Demand: If the numerator (percentage change in quantity demanded) is less than the denominator (percentage change in price), the elasticity coefficient is less than 1 and demand is inelastic * Unit Elastic Demand and Perfectly Elastic Demand * Unit Elastic Demand: If the numerator (percentage change in quantity demanded) equals the denominator (percentage change in price), the elasticity coefficient is 1 * Perfectly Elastic Demand: If quantity demanded is extremely responsive to changes in price, the result is perfectly elastic demand * Perfectly Inelastic Demand * Perfectly Inelastic Demand: If quantity...
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...due to more stringent environmental regulation it becomes more expensive for steel production firms to operate. Also, recent technological advances in plastics have reduced the demand for steel products. Use Supply and Demand analysis to predict how these shocks will affect equilibrium price and quantity of steel. Can we say with certainty that the market price for steel will fall? Why? Solution: The increase in the cost of production of steel will shift the supply curve to the left. This effect alone on the market will influence the market price to rise while the market quantity will fall. This is shown above by a movement from the original supply curve S0 to a new supply curve such as S1. The decrease in demand will cause the demand curve to shift to the left. This effect alone on the market will influence the market price and quantity of steel to fall. Note that the supply and demand effects on price work in opposite directions. If the supply effect dominates the demand effect, the equilibrium prices will rise. This is exhibited by the decrease in demand to D1’. On this demand curve, the net effect is for prices to rise from P0 to P1’. On the other hand if the demand effect dominates, equilibrium prices will rise. This is exhibited by the decrease in demand to D1’’. On this demand curve, the net effect is for prices to fall from P0 to P1’’. As we don’t know given the current information which effect dominates, we can’t perfectly predict the change in price...
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...Capital. D. Money. E. Enterprise. 5. (p. 8) What are the payments made to the owners of land, labour, capital and enterprise respectively? A. Rent, wages, dividends and profits. B. Rent, wages, dividends and interest. C. Rent, profits, wages and interest. D. Rent, wages, interest and profits. E. Rent, wages, profits and interest 6. (p. 7) All of the following except one are microeconomic statements. Which is the exception? A. The price of wheat declined by 5% in Canada last year. B. GDP increased by 1.8% in Canada last year. C. The cost of production in the mining industry has recently declined. D. The profits of The Canadian Corporation last year was $25 million. E. The demand for Turbinado sugar is increasing. 7. (p. 33) All of the following, except one, is demand. Which is the exception A. The quantities which consumers are...
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...1. A good for which the demand rises as income falls – an inferior good is 2. Accounting profit is the difference between total revenue and explicit costs – which of the following statements is true 3. An implicit cost is a cost that represents the value of resources used in production for which no actual monetary payment is made – which of the following statements is true 4. An increase in the price of one will cause an increase in the demand for the other – if two goods are substitute goods 5. Because we need water to live and there is so much of it – we would expect total utility of water to be high, but its marginal utility to be low. Why? 6. Cannot be changed as output changes in the short run – a fixed input is an input whose quantity 7. Change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed – marginal utility is defined as the 8. Demanded; the price of another good – Cross elasticity of demand measures the responsiveness of changes in the quantity ___ of one to changes in ___ 9. Elastic – if the percentage change in quantity demanded is greater that the percentage change in price, demand is 10. Explicit cost – a cost that is incurred when an actual monetary payment is made is an ___ cost 11. Fixed costs plus variable costs – total costs are 12. Fixed costs remain constant in the short run and its variable costs rise – as a firm produce more units of...
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...Microeconomics Chapter 1 1.1 The scarcity principle (also called the no-free-lunch principle). Although we have boundless needs and wants, the resources available to us are limited. Consequently, having more of one good thing usually means having less of another. 1.2 The cost-benefit principle. An individual (or a firm, or a society) should undertake a particular action if, and only if, the extra benefits of undertaking that action are at least as great as the extra costs. 1.3 Economic Surplus is the gain that results from undertaking an action when the benefits outweigh the costs. Simply, it is the difference between the benefit and its cost. Opportunity cost is the value of the next-best alternative to undertaking a particular action. The incentive principle. A person (or firm, or society) is more (less) likely to undertake an action if its benefit (cost) rises, and less (more) likely to undertake it if its cost (benefit) rises. In short, incentive matter, and can be powerful in shaping economic choices. Predicting how people's behaviour will be affected when the incentives they face change is the role of positive economic analysis. In contrast, normative economics is concerned with statements about what actions should or ought to be undertaken. 1.4 A sunk cost is a cost that cannot be recovered at the moment a decision is made. Chapter 2 2.1 The principle of comparative advantage is everyone can do better when each person (or each country) concentrates on the activities for...
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...Monday of Module/Week 6. 1. Data for the market for graham crackers is shown below. Calculate the elasticity of demand between the following prices. |Price of crackers |Quantity Demanded (per month) | |$3 |80 | |$2.5 |120 | |$2 |160 | |$1.5 |200 | |$1 |240 | $1.00 - $1.50: Elasticity of demand equals .45; favoring inelasticity $1.50 - $2.00: Elasticity of demand equals .78; favoring inelasticity $2.00 - $2.50: Elasticity of demand equals 1.29; favoring elasticity $2.50 - $3.00: Elasticity of demand equals 2.2; favoring elasticity If the price of graham crackers is $2.50 should firms raise or lower their prices if they want to increase revenue? Explain this in terms of elasticity. The firm should lower their prices 50 cents in an attempt to raise revenues. The elasticity of demand from 2.50-2.00 is 1.29, meaning with a reduction in prices there would be an elastic effect on quantity demanded. The maximum profit would be reached at the price of $2 because of the increased in demand with the price reduction. 2. Assume the competitive market shown below faces a short run...
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...behavior of economic aggregates on a national scale (aggregate, GDP). Microeconomics looks at the behavior of individual decision-making, and examines the economic activities of individual consumers and producers (households and business firms). Subject 2: Demand, Supply, and Market Equilibrium 3. The Law of Demand states that there is an inverse relationship between price and quantity demanded. The main objective for consumer demand is to maximize utility, which is satisfying power. Therefore the consumer would like to pay the lowest price. 4. There are five determinants for consumer demand: taste, income, and price, prices of substitutes and complements, and future expectations. If you have a taste for a certain product, you are more likely to buy more. If you have a low income, you may not be able to buy an expensive product. Also, if a product of a substitute is cheaper, consumers may switch to a new product. Finally, future expectations may influence a consumers demand for a certain product because if it will be cheaper in the future, they may hold off on buying it until the price goes down. 5. Substitutes are goods that can serve as alternatives for one another. When the price of one increases; demand for the other increases. An example would be Pizza Hut and Dominos Pizza. Complements are goods that go together, a decrease in the price of one would result...
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...DEMAND Two important forces of market are Demand & Supply Demand Can be defined as the desire for a good for whose fulfillment, a person has sufficient resources & willingness to buy the good. Desire – without money income, is a mere desire Potential demand - Desire with resources but without willingness to spend Effective demand - Desire accompanied by ability & willingness to pay Individual Demand – Quantity of a commodity that a person is willing buy at a given price over a specified period of time, say per day, per week, per month etc. Market Demand Total quantity that all the users of a commodity are prepared to buy at a given price over a specified period of time. Market demand is the sum of individual demand Law of Demand All other things remaining constant, the quantity demanded of a commodity increases when its price decreases & decreases when its price increases Other things - Consumer’s income - Price of related goods - Consumer’s taste & preferences - Advertisement Demand Curve Graphical representation of Law of demand. Demand curve concentrates on the price – quantity relationship Q = f(P) | | | | | | | | | | | | | | | | | | | | | | | ...
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...Exam 1 ECN 201 Microeconomics Chapter 1 5) What does scarcity have to do with the fact that people must make choices? Answer: Scarcity implies that people cannot have everything they want. This implies that ways must be found to determine which of the many goods that people want will actually be produced. Further, since any person cannot have everything he or she wants, the person must decide which specific things to acquire. That is, the person must make choices. Diff: 2 Topic: 1.1 The Power of Economic Analysis AACSB: Analytic skills Question Status: Previous Edition 6) What is economics and what does it try to explain? Answer: Economics is the study of how people allocate their limited resources in an attempt to satisfy their unlimited wants. Therefore, it is the study of how people make choices. Economics tries to explain real-world behavior, especially as it relates to interactions of people confronting scarcity. Diff: 1 Topic: 1.1 The Power of Economic Analysis AACSB: Analytic skills Question Status: Previous Edition 1.2 Defining Economics 1) Economics is best defined as the A) study of how people make choices to satisfy their wants. B) study of individual self-interests. C) study of how government can most efficiently raise funds by taxation. D) process by which goods are sold in free markets. Answer: A Diff: 1 Topic: 1.2 Defining Economics AACSB: Analytic skills Question Status: Previous Edition 87) Distinguish between...
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...a) Explain the basic economic concepts using the production possibilities curve(PPC) Let us assume that a JASMINE produces two products- trucks and boats. The PPC for trucks and boats shows the limits to the production of these two goods, given the total resources available to produce them. The basic economic concepts are: Scarcity, choices and opportunity cost. Point on A, B, C shows the first basic concept of CHOICES. If JASMINE is using its resources in an efficient way, then it is not possible to produce more of one good without producing less of another. JASMINE will have to make choices whether point A or point B or point C to maximize its satisfaction. On the PPF, every CHOICE made will bring about a TRADE OFF. Any point along the PPC is attainable and efficient. Resources are fully utilized in the most efficient way possible. Any point outside the PPC such as point E shows the second basic concept of SCARCITY. Because PPC shows the limits to production, therefore we cannot attain point that OUTSIDE PPC. Point outside PPC is unattainable. At point E, JASMINE wishes to produce 9 thousands of boats and 9 thousands of trucks. But due to limited resources and technology, this cannot be achieved. Point E is point that describes wants that cannot be satisfied. Therefore, point outside PPC shows scarcity. A movement from point A to point B or point B to point C shows the third basic economic concept of OPPORTUNITY COST. For example, at point B, JASMINE produces 7 000...
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