Test Reflection

Overall, I think I did pretty well on the test.  I am not sure if I got the definitions correct for the terms, though.  I knew what each term meant, but I do not know if I used correct Economical terms.  Also, I included diagrams, but I felt rushed during the exam.  So, I am not sure if I labeled the diagrams correctly and fully.  Hopefully I did well since we were given possible questions to help us study.  I will not know for sure how I did until I receive the graded test back.

Initiative: Upcoming Test

Price Elasticity of Demand  is “a measure of the responsiveness of demand to a change in price. It is calculated by taking the percentage change indemand and dividing by the percentage change in price. If a good is elastic (a value for the elasticity of more than one), it is considered to be responsive to changes in price. If inelastic (a value below one) then it is unresponsive” (camoodle).

Income Elasticity of Demand is “a measure of the responsiveness of demand to a change in income. It is an important piece of information to a firm as it helps them to predict how much the demand for their product will grow as the economy grows. We calculate the income elasticity by dividing the percentage change in demand by the percentage change in income. A positive figure means that the good is a normal good whilst a negative figure means that the good is an inferior good” (camoodle).

These terms are both useful to businesses so that the business can decide whether lowering or raising a price will hurt the total revenue.  If the product is inelastic, then raising or lowering the price is probably not going to hurt the total revenue too much.  As you can see from the diagram, raising the price for an elastic demand greatly effected the total sales, while raising the price of an inelastic demand only hurt the sales a little bit.

Initiative:Tummy Tuck Jeans

Not your daughters jeans have a product out aimed just towards to women over 40 years old.  The product is a pair of jeans that make your stomach look smaller.  This product has been very successful even though there has been an economic depression.  This is because it is aimed towards older women.  The women that the product sells to are women that have a steady job or are married to a husband that has had a steady job.  Since they have been working for a longer time, they probably have kept their job through out this downfall.  Also, jeans are a product that everyone needs, so it is not a product anyone is going to cut back on. Therefore, the jeans have been having a sales increase through the economic depression.

Oprah’s Supply Curve

Oprah has a supply curve that not many people have.  Because there is only one Oprah, her supply curve is a vertical line. It is straight up and down because no matter how high or low the demand for Oprah is, the supply stays the same.  This is shown in the diagram below.  As you can see, once the demand curve shifts to the right or the left, the price changes dramatically because the demand curve is straight up and down.  There are some other objects that has the same supply curve, such as The Mona Lisa.  It does not matter how high the demand for the Mona Lisa is, there is still only one.

Hovis Bread

While Bread is normally an inelastic product, Hovis has proven us wrong.  Bread is not a product that people can just cut down on.  Everyone needs it to live, so normally, if the price of bread goes up, then product output will only go down some.  Recently, Hovis has raised the price of bread to over 1 Euro.  When this happened, people stopped buying their bread and the sales went down tremedously.  This proves that Hovis bread is an Elastic Good, meaning it might be a luxury good.

Japan Airlines

JAL has been losing revenue at a bullet fast speed.  To help increase revenue, they need to cut down on prices.  The could cut down prices by lowing the amount of food or inflight service given.  Also, they should stop flying to small towns.  When they fly to small towns, the planes that are flying are not full.  Therefore, JAL is losing money from the flights.  AS you can see from the diagram, JAL is charging more than the Equilibrium Point.  Therefore, their revenue is not maximized.  So, to not go into bankruptcy, JAL should lower prices.