Optimality of supply and price elasticity of supply in economic systems

ECONOMICS

Table of Contents
ECONOMICS..................................................................................................................................1
INTRODUCTION...........................................................................................................................3
ELASTICITY ................................................................................................................................3
1. Concept of price elasticity of supply with its 5 determinants.................................................3
2. Examination of the list according to its elasticity...................................................................7
3. Justification.............................................................................................................................8
TASK 3............................................................................................................................................9
1. Differentiation between in explicit cost and implicit cost .....................................................9
2. Effects of different costs.........................................................................................................9
3. Law of diminishing marginal return ...................................................................................10
TASK 4..........................................................................................................................................10
1) Advertising reduce and increase economic well-being.......................................................10
2) Market research and brand management are redundant and to look what customer have
already bought to find out the customer want: .........................................................................11
3) Payoff matrix........................................................................................................................11
4) Excerpt..................................................................................................................................11
TASK 5..........................................................................................................................................13
1. Inflation make nominal GDP and reason why GDP does not reflect total production.........13
2. Classification of person as employed, unemployed or not in labour force...........................13
3. Labour force participation rate..............................................................................................14
4. Excerpt..................................................................................................................................14
CONCLUSON...............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Economics is a scientific term which has the broad referring in which it is related with the
human action as well as also relates with the human choice and utilisation of scare resources.
There are many theories, principles and models that deal with how the market process works.
The deep description about the economics is focus on how the wealth created and distributed in
communities, how the scare resources allocates with their alternatives. Human wants and needs
are an important term in the economics sense. The present report emphasise on elasticity, cost of
production, GDP, unemployment and business growth, market power and business strategy. All
such terms of the micro and macro economics are going to discuss in this assignment(Williams
and Laurens, 2010).
ELASTICITY
In economic science term elasticity is defined as the measure of responsiveness of
demand and supply of goods to increase and decrease in its price. Hence, the change in quantity
in the comparison with change in demand and supply can determine with the help of elasticity
concept. It can calculated with the help of following formula:
Elasticity= percentage change in quantity / percentage change in price
It is a degree through which individual, consumer or producers change their
demand or the amount which supplied in the market due to change in price and in income. If the
outgo level is high then suppliers supply more and more goods on the other hand if financial gain
level is not high then producers start supply low amount of products(Zavadskas and Turskis,
2011).
1. Concept of price elasticity of supply with its 5 determinants
It is a measure which helps in determine about the quantity supplied of good and service
in the response in change in price.
This is defined in the quantitative form in which the percentage change in quantity
supplied is divided by the percentage change in price. The major determinant of price elasticity
of supply are as follow:
a)When PES >=1, then supply is price elastic
b)When PES < 1, then supply is price inelastic
c)When PES = 1, means the good has unit elasticity

d)When PES = 0, supply is perfectly inelastic
e)When PES = infinity, supply is perfectly elastic
All the following situations are the key determinants in the field of price elasticity of
supply and demand.
1. Elastic: If there is a slight change in the price examine due to high change in supply then
it is the situation of high elasticity. In such condition E= ∞.
Price of apple (in £) Supply (in units)
30 100
30 200
30 300
According to this table there is not a single change is monitor in the price of apple in the
market but their supply is changing continuously with high difference. It is a situation of highly
elasticity.
2. Perfectly inelastic supply: According to this aspect, it is identify that if there is few
changes examine in the price but its supply remains constant or with some changes. In
this scenario E=0.
Price of apple (in £) Supply (in units)
Illustration 1: high elasticity
of supply, 2017