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Essay / Research Paper Abstract
This 4 page paper defines and explains the economic concept of price elasticity and cross-price elasticity, looking at influences such as the price of complimentary and substitute goods, the role of advertising and the role of disposable income. The bibliography cites 2 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEPEdefin.rtf
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Unformatted sample text from the term paper:
with the exception of giffen goods, the demand for goods will decrease as the price increases, and as the price decreases the demand will increase. The traditional way
of looking at the way supply and demand is established is with the use of supply and demand curves, the use of supply and demand curves can help to explain
the concept of price elasticity. The demand curve slopes downwards, indicating that as the price increases demand will decrease. The supply line slopes upwards as the price increases supplier will
be more willing and more attracted to supply. The price will be determined where the lines meet. Elasticity of price tells us the rate at which changes in the
price will impact on the demand, and as such the demand line, so that new demand levels can be assessed. Goods that
are needed, such as utilities and basic food supplies will need to be bought even if prices increase dramatically, this means the demand curve will be less steep, meaning that
the demand will fall of slowly. Where the goods are luxury goods and not essential, for example, chocolate or champagne, then the demand curve may be steeper as the demand
will drop off more rapidly as the price increases. By understanding the elasticity forecasts can be made, this may help to maximize the profits of a company if looking to
change the price and the level of change may be estimated to allow better business decision to be made. The calculation to assess elasticity is simple, but there are many
influences that need to be understood. There are many influences on the elasticity of good, in excess of simply the price, but these reflect in
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