Elasticity Analysis - Short Paper One

one- page paper

This is a paper on elasticity - price, cross-price, income and supply elasticity.

Guidelines on your paper:

Guidelines on your paper:

Perhaps the best way to ensure that the concepts are covered is to organize the paper by topic: 1) demand, 2) supply, 3) price elasticity, 4) cross elasticity, 5) income elasticity, 6) supply elasticity.  Pick a company and break the analysis down by economic topic. This is a suggestion to ensure you cover the concepts. (See the above sample short paper - don't use that company ). It will be easier if you select a company that only has one product line.

Within the above headings you do the analysis -- demand shifting right or left (by numbers of units sold or sales data - are sales increasing or decreasing). What is causing the shift in demand - prices of related products, preference change due to advertising, income levels, number of customers, etc. What about supply (shifting right or left and why) - is the company adding to or reducing capacity or outsourcing.

Elasticities: price elasticity - elastic or inelastic and why - what makes it elastic or inelastic - reasons from the lecture or text. The sign is negative as price and volume sold move in opposite directions. You won't know the precise number but since you know factors that influence elasticity you will be able to infer whether it is elastic or inelastic. Include both the a) industry segment and b) product line or branded elasticity. In general the product line will be more elastic than the industry segment.

Cross elasticity - for substitutes - the cross elasticity must be what - the sign and the size? You know this information - you just need to use this for the company you selected. For complements - the cross elasticity sign must be?

Income elasticity - you have some classifications in the lecture to use such as normal, inferior.

Supply elasticity - the sign is positive but is it low or high - can dot com companies expand production relatively easy without its marginal costs shooting up? The sign is positive as production and price move in the same direction. Is supply elasticity elastic or inelastic and why.