Elasticity of Demand (Essay Sample)
For this assignment, you will answer a series of questions in the form of an essay. Support your answers with research from at least three peer-reviewed journal articles or other sources).
Research elasticity information for two particular goods: one with an elastic demand and one with an inelastic demand. Using elasticity information you gather, predict changes in demand. The United States Department of Agriculture website has a good resource to help with this.
Describe how marginal analysis, by avoiding sunk costs, leads to better pricing decisions.
Explain the importance of opportunity costs to decision-making and how opportunity costs lead to trade.
Evaluate how better business decisions can benefit not just the producer but the consumer and society as a whole. In your evaluation, contrast the deontology and consequentialism approaches to ethics.
Your essay must be at least three pages in length and include at least three peer-reviewed resources.
Adhere to APA Style when writing your essay, including citations and references for sources used. Be sure to include an introduction. Please note that no abstract is needed.
Elasticity of Demand
Elasticity of demand can be defined as the responsiveness of quantity demand to changes in various factors that affect demand. In this paper, I will focus more on the own-price elasticity. Demand for agricultural commodities respond differently to changes in price. For example, corn is a major cereal in the United States. As a result, the substitutes for this commodity are few. For the demand for corn to change, there must be significant fluctuation in price. This implies that corn has inelastic demand in the United States. On the other hand, there are various sources of protein in the U.S. like beef. Since there are many substitutes for this commodity like poultry, fish, and mutton, the demand for beef is very responsive to changes in price. Thus, beef has an elastic demand.
The information about elasticity is essential in predicting the demand for commodities (Asadinejad et al., 2016). For example, when the price for corn increases, people will continue buying the product. Consumers will change their demand patterns when the price change is very huge such that corn is not affordable. On the other hand, the elasticity of beef can be used to predict its demand. When the price of this particular commodity increases, many people will shift to other affordable protein sources. As a result, its demand will decrease. Thus, elasticity is an essential aspect that can be used to predict future demand for goods.
Marginal analysis entails the comparison between the additional benefits and costs related to a particular activity. It is one of the strategies used for managerial decision making. However, during the analysis, the prices that have already been incurred and cannot be recovered should not be considered.
Marginal analysis is essential in pricing decision making. It ensures that only the costs associated with the activity are included in the price of commodities (Tideman & Plassmann, 2017). Additionally, marginal analysis ensures that the charges which have already been incurred and cannot be included are not included in the pricing of commodities. The marginal analysis also leads to better pricing decisions because it only considers the costs and benefits of a particular activity. This is the information required to determine the price at which commodities produced as a result of such events can be priced.
Opportunity cost reflects the benefits forgone when choosing between two available alternatives. Although opportunity cost is not reflected in the financial statements of businesses, it is an essential aspect used in decision making. A company has to choose an alternative where the benefit that is forgone is very minimal. Without the opportunity costs, decisions would be made without a valid reason to support them. Thus, the available options are considered before any decision is made, and the one with the lowest opportunity cost is chosen.
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