Check Online MGt705 Assignment 1 Solution and Discussion Ideas Fall 2014

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Read carefully the Page # 14, 15,16 & 17 of this document, then you will be able to solve case 1 easily.

Remember 1 thing that u have to find demand curve faced by the company in A & B parts of case 1. There is change in demand & demand curve. so you have to follow the both examples of P3.5 & P3.6. The solution of P3.6 (Part A) is much appropriate for calculating the demand curve for part A & B. As the demand curves r given in the P3.6.


Chapter 3
DEMAND AND SUPPLY
QUESTIONS & ANSWERS
Q3.1 What key ingredients are necessary for the creation of economic demand?
Q3.1 ANSWER
Two basic conditions must be met before economic demand is created. First, there
must be value associated with acquiring and using the good or service. For
individuals, this value is measured in terms of utility, well-being, or satisfaction
derived through consumption. For firms, this value is measured in terms of the profit
created through resource employment. Second, there must be an ability to pay. Both
individuals and firms must demonstrate an economic capability to acquire, or their
wants will remain unfulfilled, and no economic demand will result.
Q3.2 Memory chip maker Micron Technology Inc. enjoys strong demand for its products
from manufacturers of computers and intelligent electronics. Describe the difference
between direct demand and derived demand.
Q3.2 ANSWER
Direct demand is consumption demand for goods and services. Direct demand is
demand by consumers based on the satisfaction or utility derived from consumption.
Derived demand is indirect in the sense that it represents demand by producers based
on the usefulness of inputs in the production of goods and services for final
consumption. Derived demand arises when it becomes profitable for a firm to use a
given input in the production of some other valuable product.
Q3.3 The Ford Escape Hybrid is the first gas-electric hybrid SUV produced and sold in
North America. How would Ford estimate the demand influence of growing
environmental awareness by consumers?
Q3.3 ANSWER
Variables are included in a demand function because they are thought to affect the
quantity of a product that will be purchased. Some variables such as income,
education, age, family size, and so on, are included in an attempt to identify economic relations that influence demand. To the extent that environmental
awareness is higher among the highly educated, or among those with high incomes,
demand influences of environmental awareness could be captured by those variables.
Otherwise, consumer interviews might identify characteristics of consumers with
strong environmental concerns. Others factors , like price, price of competing goods,
advertising expenditures, and so on, are included to account for closely linked
economic forces as well as broader market conditions.
Q3.4 The Energy Department estimates that domestic demand for natural gas will grow by
more than 40% between now and 2025. Distinguish between a demand function and
a demand curve. What is the difference between a change in the quantity demanded
and a shift in the demand curve?
Q3.4 ANSWER
A demand function is a statement of the relation between the demand for a product
and all variables (factors) that affect demand. The demand curve, on the other hand,
is an expression of the relation between price and the quantity demanded, holding
constant the effect of all other demand influencing variables. Movement along a
demand curve describes the relation between price changes and the quantity
demanded. Shifts in a demand curve or changes in demand indicate the effect on
demand of changes in one or more of the nonprice variables in the demand function.
Q3.5 What key ingredients are necessary for the creation of economic supply?
Q3.5 ANSWER
Two basic conditions must be satisfied before economic supply can be created. First,
there must be a willingness among producers to supply output. It must be profitable
for them to do so. Second, there must be an economic capability for doing so. Thus,
firms must be both willing and able before economic supply can be created.
Q3.6 The United States is a big exporter of animal feeds, corn, meat, fruits, vegetables and
other agricultural commodities. Explain how foreign trade affects the domestic
supply of such products.
Q3.6 ANSWER
The supply function includes all of those factors with an important direct influence
on the quantity supplied. As the price of a product rises, so too will supply as