Back to school today. Got up this morning at 5 A.M., I suppose that beer of yesterday evening had a strange effect on me. I was completely awake.
Quite exhausting, such a day with not less then eight classes (of which four are in the morning, with a 20 minute break at five past ten – and the remaining classes non stop from half past one to half past four).
Now I’ve got to learn for Economy. Elasticity of prices. A manufacturer lowers his price from 105 euro per unit to 95 euro per unit. When selling his goods for 105 euro per unit, he sold 900 units and estimates his demand to be at 1,100 units. Is this a good decision ?
Before the decrease in price we had this situation:
105 EUR x 900 units = 94500 EUR.
After the decrease in price we had this situation:
95 EUR x 1,100 units = 10,4500 EUR.
Seems like it was a good decision.
Why did the demand increased ?
We see it this way in Economy:
p0 (the original price) : 105
p1 (the current price): 95
Average of these two: 100.
Difference: -10 (105-95 = 10 and it’s minus 10 because it decreased – at least I think it was this way our teacher explained it…:D)
The price declined with -10/100 = -0.10 or 10 %.
q0 (the original quantity): 900
q1 (the current quantity): 1100
Average of these two: 1000.
Difference: + 200 (1100-900 = 200 and plus because it increased).
The quantity increased with 200/1000 = +0.20 or 20 %.
The change of the demanded quantity has risen stronger than the change of price, so we can say the change was worth it.
Thursday: school report. Forecast (lol): good for languages, normal for maths, but less good for economics and accountancy (I’m not really brilliant at it, unfortunelaty)…hope I can gain some points tomorrow for economics…
see you, chaps and have a nice flight !
Joris
P.S.: check out my new FS screenshots at my Photobucket album! And Robert Bruce, the fantastic artist that made that Bristol F.2b Fighter, is working on a Sopwith Snipe! I can’t wait to fly that beauty (I haven’t seen it, but I’m sure it will be a splendid package as well as his Bristol Fighter with it’s marvellous Virtual/3D Cockpit)…
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