Understanding Price Elasticity of Demand and the Impact of Protectionist Policies on Australian Businesses

Running head: QUESTIONS 0
STRATEGIC MANAGEMENT

QUESTIONS 1
Answer to Question 1:
Introduction
In the general meaning, economics is the study of manufacturing, supply, and
consumption and may be categorized in two wide areas of learning: microeconomics and
macroeconomics. Macroeconomics deals with comprehensive financial measures, like
general output and general revenue. Macroeconomics has its roots in microeconomics, which
deals with market and decisions making of particular economic parts, including customers
and business. Microeconomics is the rational starting stage for the education of economics.
The study highlights the essential matter in microeconomics; demand and supply study. The
demand and supply examination is study to elaborate the process of interaction by purchasers
and traders to decide the price and quantity of transaction. The price concurrently reflects the
value to purchaser of the following (or marginal) units and the price to the trader of the units.
In private enterprise market economy, which is the main apprehension of investment
forecasters, demand and supply analysis contains the most fundamental set of microeconomic
devices. Some significant factors affect the level of demand in direct or indirect manner to the
small changes in the price.
In the following parts, price elasticity, demand elasticity and inelasticity of the
demand, factors to determine the price elasticity of demand and impact of each factor on
demand for goods or services, is discussed.
Analysis
Price Elasticity of Demand is macroeconomic expression, which measures
relationship between the change in price and change in demand for the goods and services. It
shows how change in price of good will influence whole demand of good. Elasticity can be

QUESTIONS 2
described as elastic or very responsive unit elastic, or inelastic; not very responsive. Price
elasticity of demand can be measures as below-
Price elasticity of demand
Elasticity can be categorised in three types; elastic, unitary and inelastic. In elastic
demand or elastic supply, the elasticity is greater than one, stating the high sensitivity to
prices changes. In inelastic demand or inelastic supply, elasticity is less than one, stating low
sensitivity to change in prices. Unitary elasticises state comparative reaction of either demand
or supply. When change in demand of product does not relate strictly to change in other
factors, demand is measured to be inelastic. When the price elasticity of demand is zero, then
demand is perfectly inelastic.

QUESTIONS 3
Perfectly Inelastic (when PED=0)
If percentage of change in demand is less than percentage of change in price, then
demand is inelastic
Inelastic (When PED is between 0 and 1)
When the percentage of change in demand is the same as the percentage of change in
price, then the demand is unit elastic.

QUESTIONS 4
Elastic (when PED=1)
If percentage of change in demand is more than percentage of change in price, then demand
is perfectly elastic.
Perfectly Elastic (when PED>1)

QUESTIONS 5
In economics, supply and demand, relation between quantities of commodities, which
manufacturers desire to put up for sale at unlike price and number, which customers want to
purchase (Jing, Yu & Vniversity, 2016).
Sources taken from: Encyclopedia Britannica, Inc.
Demand curve-
The number of the demanded commodities depends on price of the product and
potentially on various more factors, like price of other products, income, and customer’s
choice, and periodic influences (Zhou, et. al, 2016). The combination of price-quantity may
be designed on the curve that is known as demand curve, with price showed on perpendicular
axis and quantity showed on parallel axis. Demand curve is usually the downward sloping,
showing the desire of customers to buy additional commodities at low price level. The
variation in non-price factors will be the reason to shift in demand curve, while changes in
commodity’s price may be tracked all along the stable demand curve.