# Essays on From Market Failure to Market Based Solution Assignment

The paper "From Market Failure to Market Based Solution" is a great example of an assignment on macro and microeconomics. Price elasticity when price increases from \$2 to \$2.5 = {(Q2-Q1)/ (Q2+Q1)/2} / {(P2-P1)/ (P2+P1)/2}= {(281000-310000) / (281000+310000)/2} / {(2.5 -2) / (2.5+2)/2} = -. 545The demand is price inelastic. Price elasticity when price increases from \$2.5 to \$3 = {(Q2-Q1)/ (Q2+Q1)/2} / {(P2-P1)/ (P2+P1)/2}= {(244000-281000)/ (244000+281000)/2} / (3-2.5)/ (3+2.5)/2} = -. 641The demand is price inelasticPrice elasticity when price increases from \$3 to \$3.5 = {(Q2-Q1)/ (Q2+Q1)/2} / {(P2-P1)/ (P2+P1)/2}= {(209000-244000)/ (209000+244000)/2} / {(3.5-3)/ (3.5+3)/2} = -. 594The demand is price inelasticPrice elasticity when price increases from \$3.5 to \$4 = {(Q2-Q1)/ (Q2+Q1)/2} / {(P2-P1)/ (P2+P1)/2}= {(180000-209000)/ (180000+209000)/2} / {(4-3.5) / (4+3.5)/2} = -. 497The demand is price inelasticPrice elasticity when price increases from \$4 to \$4.5 = {(Q2-Q1)/ (Q2+Q1)/2} / {(P2-P1)/ (P2+P1)/2}= {(150000-180000)/ (150000+180000)/2} / {(4.5-4)/ (4.5+4)/2} = -. 535The demand is price inelasticThe coefficient is “ the change in price by 1% brings what percentage change in demand for goods” .

(John, 1999)The graph looks asThe different elasticities have been shown at the dots marked in the sales graph.

There is a difference in elasticities along the stationary demand curve because as “ the price increases the demand falls but the change is demand does not match to the proportionate increase in price” . (John, 1999). It results in different elasticities. The factors which affect the elasticity areAvailability of substitutes: “ Increase in the number of substitutes affect the price elasticity of demand” . (Todd, 2007) When a consumer has a choice he can switch. This affects the sale. “ Increase in the number of substitutes increases the elasticity making it more elastic” .

(Todd, 2007)Amount of income spent on the good: “ The amount a consumer keeps out of his budget for a product affects the elasticity of demand” . (Todd, 2007) The elasticity gets affected by it. “ Products that have a large share of the amount the consumer spends have higher elasticity” . (Todd, 2007)

References

John M. 1999, “the concept of elasticity”, University of Canterbury, Netherland

Maini C. 2009, “Development of next generation electric car”, Stavanger, Norway

Miller T. 1997, “use of taxes on polluting activities to protect environment”, WW Norton

Steve R. 2008, “the electric car”, CEO magnifying net, US

Todd G. 1997, “A shortcut to economic literacy”, Internet Centre for Management and Business Administration, pg 43

Terry J. 2001, “from market failure to market based solution”, Federal reserve bank of Cleveland, pg 37-44

Varian H. 1993, “Intermediate Microeconomics”, Norton, McGraw Hill