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Course
Name
Institution Affiliation
Introduction......................................................................................................................................2
Factors influencing the shape of the demand function....................................................................2
Changes in Supply and Demand......................................................................................................4
Management roles............................................................................................................................6
Effects of interest rate on business operations.................................................................................7
Conclusion.......................................................................................................................................8
Introduction
The purpose of this report is to consider the economic effects of changes in quantity demanded
as a result of the increase in price as well as changes in quantities supplied as a result of the
changes in price.
Coffee industry
Demand function 200 - 30 p
Supply function 100 + 20 P
At equilibrium = QD = QS
200 - 30 p = 100 + 20 P
100 = 50 p
P = 2
= QD = QS
= 200 - 30 (2)
= 140
Factors influencing the shape of the demand function
One factor that influences the shape of the demand function is the relationship of the quantity
demanded and the price. If the quantity demanded and the price have a negative relationship, the
demand curve will have an inverse slope. The other factor affecting the shape of the demand
curve is the level of elasticity. This means that a product with high elasticity of demand will have
a higher slope than a product with less elasticity of demand.
The demand elasticity one price interval above the equilibrium price
Elasticity = % Change in quantity/ % Change in price
P = 3
Qd = 200 - 30 (3)
Qd = 200 – 90
Qd = 110
% Change in quantity = 110 – 140 / 140
= - 21%
% Change in price = 3-2/2
= 50%
Elasticity of demand = - 21%/50%
= - 0.43
The demand elasticity one price interval below the equilibrium price
Elasticity = % Change in quantity/ % Change in price
P = 1
Qd = 200 - 30 (1)
Qd = 200 – 30
Qd = 170
% Change in quantity = 170 – 140 / 140
= 21%

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