For each of the following products, answer each of the four questions relating to economic factor behind price-change response. Be prepared to explain your reasoning for each answer. Then use these answers to rank these products by their likely brand price elasticities.
a. A filling by your dentist
b. 2012 Honda Accord
c. A fender repair by McKenzie’s Auto Body
d. Box of Q-tip cotton swabs
a. A filling by your dentist- Economic factor responsible for price change response is the substitutes and technology, and related demand and supply. A filling for your cavity has no close substitute, its related to your health. So sooner or later, the need arises. But if there is no need of filling, the patient is healthy, then no need. So price change mainly depends on demand. But if technology is getting more advanced in dental services so that it required no filling, then it prices can go down. Also, it depends on the education and expertise required in dental services. If more people have the required expertise, then the supply will be more and hence price will go down, But if less people are there in this field, price will be more because of more demand. Inelastic.
b. 2012 Honda Accord- again depends on other substitutes. If more comfortable and luxurious Honda's are produced(technology), then demand for Honda Accord 2012 will be reduced and hence price. 2012 is old model and new other models are in place so its price is reduced. Economic factor is technology and substitutes, for example other Honda models recently launched which have more features. Elastic
c. A fender repair by McKenzie's Auto body - Economic factor responsible for price change is the number of compliments for car parts which are very customized. If the technology or the other compliments in making those fender gets advanced, then its price can reduced. And if the demand for other companies auto are more and their fender is strong, then there will be low price. It depends on the demand of the McKenzie brand. If its well established and more in demand, then the price will go up. Inealstic
d. Box of Q-tip cotton swabs - mainly a kind of luxury, which are not suggested for use by doctors. Cotton(compliment) is very cheap and the price of cotton is the economic factor in its price change. Usage is less, hence demand and hence price. Elastic.
Ranks by their price elasticities:-
1. 2012 Honda Accord - high elastic, luxury
2. Box of Q-tip cotton swabs - elastic, less usage
3. A fender repair by McKenzie's Auto Body - inelastic
4. A filling by your dentist - high inelastic, necessity
For each of the following products, answer each of the four questions relating to economic factor...
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