Assign 1-Me

 

 ASSIGNMENT-1  ASSIGN MENT-1

MANAGERIAL ECONOMICS

VIDHARSHANA.E

Question 1. Companies often change colour, package, design, and advertisement advertisementss for their products. Is it because the companies wish to counter the impact of diminishing marginal utility. Explain with suitable examples that you may have witnessed, heard, or read. Explain the law of diminishing Marginal Utility.

Marginal utility is the utility experienced by consumption of one additional unit of the good or service when compared to the previous of diminishing marginal utility  meansone. the marginal utility from usage of The law each additional unit declines as consumption of that good or service increases. The marginal utility can decline into negative utility, as it may become entirely unfavorable to consume another unit of any product. Example:consumption of chocolate gives us more utility, but after having 3-4 pieces of chocolate, we may not enjoy the same way of having initial 3 piece consumption though total utility is more but marginal utility will reduce.

MARGINA L

NO OF CHOCOLATE PIECES

UTILITY

UTILITY

0

0

0

1

15

15

2

20

5

3

23

3

4

25

0

5

22

-3

6

18

-4

7

15

-3

 

 ASSIGNMENT-1  ASSIGN MENT-1

MANAGERIAL ECONOMICS

VIDHARSHANA.E

With the above table and graph shows that, having 1st piece of chocolate gives 15 utils of  marginal utility and 2nd gives marginal utility of 5 utils and go on it is reducing, from 5th onwards it’s started giving –ve marginal utility and hence total utility curve starts declining.To counter the impact of diminishing marginal utility, companies often change colour, package,design and advertisements for their products to increase the sales. Question 2. Any change in product price done by the company will require the company to assess the impact on its quantity demanded. Competitor price changes can also influence the demand of the product of the respondent company. This is because of cross price elasticity. elasticity. A change in our in income come tends to mak makee us less pric pricee sensitive. Explain the concept of Elasticity - own price elasticity, cross-price elasticity, and Income elasticity with help of suitable examples. CONCEPT OF ELASTICITY Elasticity means means the change in the measure/pe measure/percentage rcentage of price of a goods/service wil willl

determine the percentage of demand that goods/service.If the price the the  product is higher or lower lowerchange then there wi will ll be of a huge impact on the demand thisofmeans  product has higher elasticity. elasticity. This may vary with different aspects with other aspects being constant .Based on the factors there are 3 types of elasticity OWN PRICE ELASTICITY When a change in percentage of price of its own product has impact on its quantity of demand then it is called own price elasticity Example: When the price of TV decreases a period after its new launch then the demand will be high for the TV while during launch time the demand is lower due to higher price. ELASTICITY=P/Q*((Q2-Q1)/(P2-P1))

 

 ASSIGNMENT-1  ASSIGN MENT-1

MANAGERIAL ECONOMICS

VIDHARSHANA.E

PRICE

Demand

Elasticity

40000

0

NOT DEFINED

38000

100

-12.7

35000

200

-2.5

28000 26000

300 400

-4.7 -3.3

24000

500

-1.2

20000 600 1.0 Here the elasticity is high when E>-1 with the decrease in the price and increase in demand . CROSS PRICE ELASTICITY When a percentage change of its substitute products changes the quantity of demand of other product then it is called cross price elasticity

For substitutes the E>0 where demand of a product increases with the increase in price of its substitute For complement the E0.Which means the demand increase with increase of income For inferior goodsE