Supply and Demand Essay Example | Topics and Well Written Essays - 500 words - 3

Supply and Demand - Essay Example As such, if the price change leads to an equal change in commodity demanded then that results to a uni elastic demand (Ferguson, 1972) Elastic demand refers to the demand for which the price elasticity is greater than 1. As such, if the demand elasticity is greater than 1 it means that the percent change in quantity is much higher than the percent change in price. Unit elastic demand occurs if the quantity demanded is directly proportional to the price change meaning the coefficient of elasticity is equal to 1. While inelastic demand, occurs when elasticity coefficient is less than 1. This implies that the percentage change in the amount of quantity is less than the price change. Cross price elasticity of demand is the rate of change the quantity required due to the price change of the other commodity (Gillespie, 2007). As such, when two good are substitutes, consumers tend to purchase more of one good due to increase in the other substitute. Similarly, for complementary commodities, price increase in a commodity causes a reduced demand for all goods. Moreover, cross elasticity of demand points out the sensitivity of a particular commodity to price change. For a normal good, increase in income results in an increase in the demand. This is seen as the coefficient of elasticity of N>0 (Ferguson, 1972).For an inferior, an increase in price leads to a decrease in demand. In this case, the coefficient of elasticity is N1. Notably, a superior good exhibits the same coefficient of elasticity similar to normal good. Demand

Unruly Spider Case Study Example | Topics and Well Written Essays - 500 words

Unruly Spider - Case Study Example The major problems lay in the fact that the subcontracted company worked with inadequate drawings and inadequate tools. There was not a clear order from the engineer and this should have been communicated more effectively. The 1 1/8-inch-diameter holes had a rough finish on the bore. The magnaflux mark was not clearly legible. The inspection department rejected it. Extra money must now be spent by Mr. Speed to get the right tools and additional labor to finish the job right. If he does not raise the price on each unit he could lose money. A. The gears that were rough cannot be repaired but they could possibly be recycled and the money received from that could go to furnishing new equipment to make the grinding operation more efficient. B. Mr. Speed could raise his price to compensate for his expenditures of over $25,000 in repairing the tooling and redo with order with finished bores. C. The old gears can be recycled to decrease the extra costs and Mr. Speed should raise his prices to compensate for the difference. D. The advantages of recycling the gears are that it will offset some of the cost and the disadvantage of this would be that the costs will not meet the total expenditures. Mr. Speed raising his price per unit could result in extinguishing his output and making him a profit. The disadvantage of this would be that the price per unit may not be economical for the customer. The best choice would be for Mr. Speed to raise his price per unit and receive his profit on the back end. The process of salvaging the rough bores is not economical because it would require the operation of expensive chrome plating. It is best to raise the price and get the necessary equipment needed to complete all future jobs efficiently.