Elasticity Eco 1043 (Group 3)

Summary

This video presents an insightful group assignment on the concept of elasticity, focusing on strategies for businesses to increase profits post-pandemic. The group explores various scenarios, including increasing or decreasing prices, and their impacts on consumer behavior. They delve into price elasticity, explaining different types such as perfectly inelastic, perfectly elastic, unitary, elastic, and inelastic demands. Further, they discuss cross-price and income elasticity, illustrating how changes in income or related product prices affect demand. The presentation concludes with the significance of understanding price elasticity for small and medium enterprises, using examples like Starbucks and Facebook to demonstrate strategic pricing decisions.

Takeaways

• 📈 The group discusses strategies to increase profit post-pandemic, considering both increasing and decreasing prices.
• 💼 They suggest that higher prices might work for some due to people working from home and having more time for online shopping, while lower prices could attract those who lost jobs and need to save.
• 🧘‍♂️ The script introduces the concept of price elasticity of demand, explaining how changes in price affect the quantity demanded.
• 🔍 The group details different types of price elasticity: perfectly inelastic, perfectly elastic, unitary, elastic, and inelastic demand, providing examples for each.
• 🔄 They explain cross-price elasticity, discussing how the price of one good affects the demand for another, either positively or negatively, and when there is zero effect.
• 💰 The script delves into income elasticity of demand, showing how consumer income influences demand for certain goods, and categorizes it as positive, negative, or zero.
• 🏪 The importance of understanding price elasticity for small and medium enterprises (SMEs) is highlighted, especially for decision-making in a monopolistic market.
• 🌐 Examples of SMEs like Starbucks, Facebook, Adidas, and Petronas are given to illustrate how they might use knowledge of price elasticity.
• 📊 The group emphasizes that monopolies use price discrimination, setting different prices for consumers based on the elasticity of demand for their products.
• 🙏 The presentation concludes with a thank you note, expressing gratitude for the audience's time and hoping for a better understanding of the topic.

Q & A

What is the main topic of the group assignment presented in the video?

The main topic of the group assignment is 'Elasticity', specifically focusing on price elasticity of demand and its various aspects.

How many group members are there, and who are they?

There are four group members: the first presenter, Ctrl Z Zukifli, the second presenter, Nerdina Binti Abdul Rashid, the third presenter, Aman Hanani Binti Mohammed Hamdan, and the last presenter, Yasmin Patricia.

What are the two scenarios discussed to increase profit during the pandemic?

The two scenarios discussed are increasing the price, targeting people who still earn their full salary and have time for online shopping, and decreasing the price to attract customers who have lost their jobs and are looking for lower-priced goods.

What is the definition of price elasticity of demand as presented in the video?

Price elasticity of demand is defined as the degree of responsiveness of quantity demanded to change in price.

What are the five types of price elasticity of demand mentioned in the video?

The five types are perfectly inelastic demand, perfectly elastic demand, unitary demand, elastic demand, and inelastic demand.

Why is perfectly inelastic demand represented by a vertical graph?

Perfectly inelastic demand is represented by a vertical graph because the quantity demanded does not change regardless of the price change, as seen with diabetic patients who cannot alter their consumption based on price.

What is the significance of cross-price elasticity of demand?

Cross-price elasticity of demand measures the degree of responsiveness of the quantity demanded of one good to a change in the price of another good.

How does positive cross-price elasticity of demand differ from negative cross-price elasticity?

Positive cross-price elasticity occurs when goods are substitutes for each other, and an increase in the price of one leads to an increase in demand for the other. Negative cross-price elasticity occurs with complementary goods, where an increase in the price of one leads to a decrease in demand for the other.

What is income elasticity of demand and what are its types?

Income elasticity of demand measures the relationship between consumer income and the demand for a certain good. Its types include positive income elasticity (unitary, inelastic, and elastic), negative income elasticity, and zero income elasticity.

Why is understanding price elasticity important for small and medium enterprises (SMEs)?

Understanding price elasticity is important for SMEs as it helps them make informed decisions about pricing strategies, such as whether to set high or low prices based on the elasticity of demand for their products.

What is an example of a monopoly and how does it relate to price elasticity?

A monopoly is a firm that is the sole seller of its product without close substitutes and has market power to influence prices. Monopolies consider the nature of demand, charging higher prices to consumers with inelastic demand and lower prices to those with elastic demand.