033 Group 4.pptx (1)

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Jan 9, 2024

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ECON±UA ² Week ³ recitation Your names" Teresa Martinez±Laredo´ Samantha Young´ Scarlet Zhan´ Dominic Cappuccino´ KevinµYue¶ Hu´ Medhya Ravishankar´ Kiha Ahn If your name here differs from your name on Brightspace´ please notify the grader using the comment box on Brightspace·
Part °: Keyword review Instruction: Write down economics terms that correspond to each of the following sentences± ● When the quantity demanded is greater than the quantity supplied´ we have shortage in the market· The price will rise · ● When the quantity demanded is equal to the quantity supplied´ the market is in equilibrium· ● When the quantity demanded is less than the quantity supplied´ we have surplus in the market· The price will fall · ● Price elasticity of demand is equal to the percentage change in quantity demanded divided by the percentage change in price ·
Part °: Keyword review ²cont±³ ● When the price elasticity of demand is zero´ we say that the demand is perfectly inelastic · ● When the price elasticity of demand is less than ²´ we say that the demand is inelastic· ● When the price elasticity of demand is equal to ²´ we say that the demand is unit elastic · ● When the price elasticity of demand is greater than ²´ we say that the demand is elastic · ● When the price elasticity of demand is infinity´ we say that the demand is perfectly elastic demand · ● If the good has no close substitutes available´ the elasticity of demand is less elastic· ● If the good is a necessity´ the elasticity of demand is inelastic · ● If the scope of the market is large´ the elasticity of demand is less elastic · ● If the time horizon is long´ the elasticity of demand is more elastic ·
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Part ´: News analysis Read the newspaper article below about panic buying during the pandemic and answer the following questions· https"¸¸www·bbc·com¸news¸world±australia±¹²º»²³¼¼ ● What happens to the demand and supply of toilet paper" Draw a graph and explain· ● What drives the change you observed in the previous question" Clearly explain your answer· ● What happens to the equilibrium price and quantity of toilet paper" ● How would you describe the elasticity of demand of toilet paper" Justify your answer·
Write your answers here· Add a new slide if needed· Quantity Price Supply Demand ● What happens to the demand and supply of toilet paper? Draw a graph and explain± The demand for toilet paper has increased drastically´ so the demand curve shifts to the right· The supply of toilet paper remains the same· New equilibrium Equilibrium
● What drives the change you observed in the previous question? Clearly explain your answer± ± Australians were fearful that they would lose the luxury of toilet paper´ so the demand for toilet paper dramatically increased· The supply stayed the same´ but then rose to meet the higher demand to reach equilibrium ● What happens to the equilibrium price and quantity of toilet paper? ± The new equilibrium price and equilibrium quantity are both higher than before ● How would you describe the elasticity of demand of toilet paper? Justify your answer± ± The demand of the toilet paper is not very elastic because it has no substitute and it is a necessity
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Part µ: Market analysis Levitt et al· µ¼½²¾¶ studied the effects of various kinds of price discounts on the behaviors of digital product consumers µgold bars in a mobile game¶· The table below summarizes the main findings of the study· Fill out the rest of the table· Experiment Revenues per user Quantity purchased per user Average price per gold bar ¶ change in quantity ¶ change in price Elasticity Standard discount ¼¼¼· ³ ¼½¾·»³ ²½ ·½½ N¸A N¸A N¸A Enhanced discount ¼¼³·¹½ ¼¼½·²² ²½²·!! ¾·³¾¿ ±¹·º¼¿ Elastic±²·²» Deep discount ¼¼¼·³³ ¼¼!·»! !¾·!º ³·²»¿ ±¹·½¹¿ Inelastic±½· ¼ Radical discount ²! ·º¼ ¼! ·!¹ ¾¾·³º ¼¾·»»¿ ±»º·»¼¿ Inelastic±½·º² Note that these are estimated data´ and´ thus´ there may be some statistical discrepancy·
The table below compares the results between a moderate spenders and heavy spenders in this mobile game· Without using a calculator´ can you tell which group has more elastic demand" Experiment Revenues per user Quantity purchased per user Average price per gold bar Revenues per user Quantity purchased per user Average price per gold bar Moderate spender Heavy spenders Standard discount º!»·½³ º¼³·º¾ ²½!·³¼ ²¹´² !·¼º ²³´²²¼· ! ²½º·¾» Radical discount ²¹·³¼ ²´½ ²·¾¾ º¹·»! ²¼´!!¹·º² ¼½´¼ ³·¾¹ ¾³·½º Moderate spender is more price elastic than heavy spender· This is because the revenue growth with the price reduction µhigher discount¶ is negative for heavy spenders and positive for moderate spenders· This indicates that for moderate spender´ price will heavily influence the quantity of “goods” they would purchase in the game· That’s why the growth in sale makes up for their price reduction´ ultimately increasing their revenue·
A mobile game company hires you as an consultant· Use ²½½±¼½½ words to summarize the findings from this study and provide recommendations on how to maximize the revenue· The deep and radical discounts both have inelastic demand´ while the enhanced discount has an elastic demand· To maximize the revenue´ we want discounts whose prices are inelastic µless than ²¶ because crease in price leaves the quantity demanded unchanged· The discount that is closest to the perfectly inelastic demand is the radical discount´ as it’s elasticity is ½·º²´ which is the closest to ½ of all the discounts we studied· We also found that moderate spenders will spend more than heavy spenders per gold bar with radical discounts· As stated before´ the growth in sale makes up for their price reduction´ ultimately increasing the companies revenue· The company should target moderate spenders with radical discounts to maximize our revenue µif they can segment those two markets¶·
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Save the slides to your computer and upload them on Brightspace± You must upload the file for yourself± Your grader won’t grade you if they don’t see the file on your Brightspace±

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