Discussion
Question 1

The law of demand states that a fall
in the price of a good raises the quantity demanded, and the increase in price
leads to a decrease in quantity demanded. The price elasticity of demand
measures the responsiveness of the quantity demanded to a change in price.
Demand for a good is said to be elastic if the quantity demanded responds
substantially to changes in the price, and the percentage change in quantity
demanded is greater than the percentage change in price. Demand is said to be
inelastic if the quantity demanded responds only slightly to changes in the
price, which indicates that the percentage in price is greater than the
percentage in quantity demanded.
However, the extent of
responsiveness of quantity demanded to a change in price depends on the nature
of a particular good or service in the market. The price elasticity of demand
partly depends on the availability of close substitutes. When a large number of
substitutes are available, consumers respond to a higher price of a good by
buying more of the substitute goods and less of the relatively more expensive
good. In addition, goods or services that are considered necessities tend to
have less elastic (more inelastic) demand, whereas goods or services that are
considered luxuries have more elastic (less inelastic) demands.
Explain why the demand for the
good or service provided by the organization you work for is elastic or
inelastic. How does this influence pricing decisions?Provide examples on how the
availability of close substitutes affects price elasticity of demand.Give specific examples of
necessities or luxuries, and explain how they affect price elasticity of
goods or services.

Discussion
Question 2

Externalities come about when
individuals impose costs on or provide benefits to others but do not consider
those costs and benefits when deciding how much to consume or produce. Thus
externality is a cost or benefit received by a person not involved in a market
transaction, and therefore not reflected in the market price of the commodity
being transacted. There are two types of externalities: positive externalities
and negative externalities.
A positive externality
exists when an individual or firm making an economic decision does not receive
the full benefit of the decision. In this case, the social benefit is greater
than the benefit that goes to the individual or firm.
A negative externality
occurs when an individual or firm making a decision does not have to pay the
full cost of the decision. If a good has a negative externality, then the cost
to society is greater than the cost consumer is paying for it.
Both positive and
negative externalities result in market inefficiencies unless proper action is
taken.
Describe your understanding of
externalities by providing an example of a positive externality and a
negative externality.Why do positive and negative
externalities lead to inefficiency in the market economy?How can externalities be
addressed using the private sector to reduce market distortions of
externalities?What government policies help
deal with positive and negative externalities by reducing inefficiency?
Unit
2 Case Study
Only 1 paragraph

Read the LAST Word piece, Government
Failure in the News, in Chapter 17. Investigate the use of special-interest
lobbyists for some of these articles. The process of lobbying legislatures is
itself a big business. State legislatures are under the same kind of pressure
from interest groups as the Senate and the House of Representatives. Provide an
example to discuss how special interests can succeed in perpetuating policies
that are opposed by the majority of voters because the costs of organizing and
motivating groups to take political action increase with groups size.
Construct thoughtful, detailed
responses to the answers contributed by at least three of your classmates.

Unit
2 Assignment
According to the law of
demand, if price increases, quantity demanded of a good or service will
decrease or vice versa. Price elasticity of demand tells us how much quantity
demanded will decrease when price increases or how much quantity demanded will
increase if price decreases.
On the other hand,
according to the law of supply, if the price increases, quantity supplied of a
good or service will increase. Similarly, if price decreases, quantity supplied
will decrease. The degree of sensitivity (responsiveness) of production/supply
to a change in price is measured by the concept of price elasticity of supply.
Total revenue is
calculated as the quantity of a good or service sold multiplied by its market
price. Thus it is a measure of how much money a company makes from selling its
product. The core objective of a firm is maximizing profit. One of the ways to
maximize profit is increasing total revenue. The firm can increase its total
revenue by selling more items or by raising the price. Among others, this
depends on the nature of the price elasticity of demand. Moreover, the length
of time is an important factor in determining price elasticity of demand and
supply.

Explain the relationship between the price elasticity of demand
and total revenue. What are the impacts of various forms of elasticities
(elastic, inelastic, unit elastic, etc.) on business decisions and strategies
to maximize profit? Explain using empirical examples.

Is the price elasticity of demand or supply more elastic over a
shorter or a longer period of time? Why? Give examples.

What are the impacts of government and market imperfections
(failures) on the price elasticities of demand and supply?
The Assignment should be
a minimum of five pages in length, excluding title page and reference
page. Your paper must incorporate several quality references, and it must be
organized in APA format.
Submit your paper to the
Unit 2 Dropbox by the end of Unit 2.

GB540 Unit 2 Assignment Rubric

Content and Analysis

Points Possible

Points Earned

Explain the relationship between the price elasticity of demand
and total revenue. What are the impacts of various forms of elasticities
(elastic, inelastic, unit elastic, etc.) on business decisions and strategies
to maximize profit? Explain using empirical example.

20

Is the price elasticity of demand or supply more elastic over a
shorter or a longer period of time? Why? Give examples.

10

What are the impacts of government and market imperfections
(failures) on the price elasticities of demand and supply?

10

Five pages in length

10

Included at least two reliable references
Included the Index of Economic
Freedom as a reference

6

Writing Style, Grammar, APA Format

14

Total

70

Discussion
Question 1The law of demand states that a fall
in the price of a good raises the quantity demanded, and the increase in price
leads to a decrease in quantity demanded. The price elasticity of demand
measures the responsiveness of the quantity demanded to a change in price.
Demand for a good is said to be elastic if the quantity demanded responds
substantially to changes in the price, and the percentage change in quantity
demanded is greater than the percentage change in price. Demand is said to be
inelastic if the quantity demanded responds only slightly to changes in the
price, which indicates that the percentage in price is greater than the
percentage in quantity demanded.However, the extent of
responsiveness of quantity demanded to a change in price depends on the nature
of a particular good or service in the market. The price elasticity of demand
partly depends on the availability of close substitutes. When a large number of
substitutes are available, consumers respond to a higher price of a good by
buying more of the substitute goods and less of the relatively more expensive
good. In addition, goods or services that are considered necessities tend to
have less elastic (more inelastic) demand, whereas goods or services that are
considered luxuries have more elastic (less inelastic) demands.Discussion
Question 2Externalities come about when
individuals impose costs on or provide benefits to others but do not consider
those costs and benefits when deciding how much to consume or produce. Thus
externality is a cost or benefit received by a person not involved in a market
transaction, and therefore not reflected in the market price of the commodity
being transacted. There are two types of externalities: positive externalities
and negative externalities.A positive externality
exists when an individual or firm making an economic decision does not receive
the full benefit of the decision. In this case, the social benefit is greater
than the benefit that goes to the individual or firm.A negative externality
occurs when an individual or firm making a decision does not have to pay the
full cost of the decision. If a good has a negative externality, then the cost
to society is greater than the cost consumer is paying for it.Both positive and
negative externalities result in market inefficiencies unless proper action is
taken.Only 1 paragraphRead the LAST Word piece, Government
Failure in the News, in Chapter 17. Investigate the use of special-interest
lobbyists for some of these articles. The process of lobbying legislatures is
itself a big business. State legislatures are under the same kind of pressure
from interest groups as the Senate and the House of Representatives. Provide an
example to discuss how special interests can succeed in perpetuating policies
that are opposed by the majority of voters because the costs of organizing and
motivating groups to take political action increase with groups size.Construct thoughtful, detailed
responses to the answers contributed by at least three of your classmates.Unit
2 AssignmentAccording to the law of
demand, if price increases, quantity demanded of a good or service will
decrease or vice versa. Price elasticity of demand tells us how much quantity
demanded will decrease when price increases or how much quantity demanded will
increase if price decreases.On the other hand,
according to the law of supply, if the price increases, quantity supplied of a
good or service will increase. Similarly, if price decreases, quantity supplied
will decrease. The degree of sensitivity (responsiveness) of production/supply
to a change in price is measured by the concept of price elasticity of supply.Total revenue is
calculated as the quantity of a good or service sold multiplied by its market
price. Thus it is a measure of how much money a company makes from selling its
product. The core objective of a firm is maximizing profit. One of the ways to
maximize profit is increasing total revenue. The firm can increase its total
revenue by selling more items or by raising the price. Among others, this
depends on the nature of the price elasticity of demand. Moreover, the length
of time is an important factor in determining price elasticity of demand and
supply.
Explain the relationship between the price elasticity of demand
and total revenue. What are the impacts of various forms of elasticities
(elastic, inelastic, unit elastic, etc.) on business decisions and strategies
to maximize profit? Explain using empirical examples.
Is the price elasticity of demand or supply more elastic over a
shorter or a longer period of time? Why? Give examples.
What are the impacts of government and market imperfections
(failures) on the price elasticities of demand and supply?The Assignment should be
a minimum of five pages in length, excluding title page and reference
page. Your paper must incorporate several quality references, and it must be
organized in APA format.Submit your paper to the
Unit 2 Dropbox by the end of Unit 2.GB540 Unit 2 Assignment RubricContent and AnalysisPoints PossiblePoints Earned
Explain the relationship between the price elasticity of demand
and total revenue. What are the impacts of various forms of elasticities
(elastic, inelastic, unit elastic, etc.) on business decisions and strategies
to maximize profit? Explain using empirical example.20
Is the price elasticity of demand or supply more elastic over a
shorter or a longer period of time? Why? Give examples.10
What are the impacts of government and market imperfections
(failures) on the price elasticities of demand and supply?10
Five pages in length10
Included at least two reliable referencesIncluded the Index of Economic
Freedom as a reference6Writing Style, Grammar, APA Format14Total70