1. 10%increase in price
¤p=+10%
Adult demand change=-4%
youth demanded=-13%
Youth -> 13/10= 1.3 ped elastic
Adult-> -4/10=0.4-> PED
2, Adults have a large income and inalstic have a more steady habits youth are more likely to have less money which they are likely to spend on other goods.
3. Govenrments would tax cigarettes because they are demerit goods and not good for the population. the government can also make alot of revenue from the taxes
1. Change in price= 5/0.5=10%
Change in demand= 72/12*100=20%
2. 2*1=2---- price elasity---- price is elastic
3. 5*60=300
4.5*72=24
4.
5. Yes beacuse there is a positive revenue change of 24 dollar
1. % change in peice= (-0.4/4)100=-10%
% change n Qd = 30/600(100)= 5%
2. Priced elasiticity= %change in P/%change in Qd= %/-10=0.5, ped elastic
3. Revenue initially=4*600= 2400
revenue after price change= 3.6* 630=2268
%change in revenue= -132/2400*100=-5.5%
4-
5. No, because their overal revenue dropped 5.5%
Buffer stock schemes are applicable in
Comomodity (raw material) markets becayse their prices are ofton unstable.
1. Agricultuaral commodities- wheat, rice, coffee, cocoa-
-Volotile prices due to supply shifts caused by natural phenomena like weather.
2. industrial/mineral commodities- copper, rubber or tin.
-volatile prices due to changes in demand caused by rising and falling national incomes.
agricultural commodities
at the mercy of natural dangers like weather, insects or or disease.
- when conditions are excellent , agricultural commodities ofton have a bumper crop and abundant crop
industrial
changes in the world economy are likely to have a large impact on producers.
Both demand and supply side factors create instability in commodity markets.
difficult for producers to plan with uncertainity
instability can result in lower standards of living with negative consequences for prodcucers and the community.
these conditions may cause governemtns to intevene to protect prices from extreme fluctuations.
http://economicsonline.co.uk/Market%20failures%20graphs/Price+ceilings.png
Prices are allowed to fluctuate normaly when within the price band.
government intervention occurs when the free market pushes prices above the top price or below the bottom price.
bumper crop situation
in this case the buffer stock manager would need o buy uo excess supply and store it- has an oppurtunity cost
poor weather or pest problem
in this case the stock manager would release stock to bring price down.
Problems- only suitable for non perishable goods.
-storage
-improvements in technology that must be bought by governments.
-choosing the right price band is problematic.
- producers wll pressure the governemnt to make the price band high
commodity agreements
when different countries work togehrt to opperate buffer stock scheme
UNTAD in th 1960s
fail.
The interaction of, and applications of demand and supply
Price controls
| Price controls | Free market may not have the best outcome Government intervenes -max price -min price -price support Comodity agreements |
| Max price control | Government sets a max price below the equilibrium price Product is a nessecity Druing times of food shortage To ensure poor have food
Problems- black market Queues at storees Government might have to reduce the shortage Shift demand curve to the leftm goes against imposing max cost as it limits consumption Move supply curve to the right 1-offer subsidys 2- produce good themselves 3- realease stored goods The governemnt inccurs a cost and forced to take money out of other areas.
|
| Max price control | Sets a a min price above the equilibrium prices Floor prices 1. to raise income for the producers of goods such as agriculture 2. to proteect workers with min wage
Excess suply creates problems Surplusses governemt intervenes Store the surplus, destroy it or sell it abroad Oppurtinity cost for this though 2 waysfor min cost to be matainined Quotas and advertizement Problems may occur Innificiency and waste of resoruces |
| Price support and buffer stock schemes | Governments stabilise prices- raw materials Bumper crop- abundent supply Poor weather will drive priices up Big swings in demand on other raw materials too Swings in the commodity market Unstabel will cause negative consequences governmetns will intervene Buffer stock manager sts a price band
Problems- non parishable goods High costs of storage Financial preasure People want high proffit |
| Commodity agreements | Different countrys ina buffer stock scheme commodity price agreement Support commodity producers in noob countrys Rubber |
