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Elasticity Demand In Australia

557 Words3 Pages

Increased revenue can be achieved by reducing the cost of the product and creating more quantity demand. This is the main key factor to increase revenue, however there are other variables such as income, preferences, population etc. The concept of elasticity describes the variation of quantity demand in related to price of the product in a market. Referring to the page 2, showcase the different situation of the market condition. In the 1st chart, the price is increased however the quantity of the demand is minor which means it is in inelasticity condition. Best example is Oil price, assuming other factors for demand will remain consistent. When the oil price increase the customer are still willing to pay the price as there is no alternative …show more content…

Even if a country engaged in producing all the products, the country will not be productive. This can be discussed by bring production possibilities frontier theory and concepts of specialisation and exchange. The production possibilities frontier analyses the low cost of production of two products and highlights the more cost efficiency product allowing a country to gain technological advantage or trading. It means specialization of one product and it has a comparative advantage which allow international trading. Reference to page 2, illustrates production of automobile and fruit of two countries. Currently, Australia is producing 8 tonnes of fruits and 2 thousand of automobile where in Japan is producing 10 thousand of automobile and 2 tonnes of Fruits. It is very much clear from the page 2 calculations, that cost of product for fruits is lower in Australia while production cost for automobile is lower in Japan. It is possible for Australia to focus only on fruit production and Japan can manufacture only automobile then the can trade of their products. In this case Australia can trade fruits and Japan can trade automobile. This will increase their productivity than before. Australia will benefit from increased amount of 5 thousands of automobile where Japan will benefited from increased amount of 4 tonnes of

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This week in chapter six of the book, Economics, written by McConnell, Brue, and Flynn, I have learned about price elasticity of demand and supply, cross elasticity, total revenue, and income elasticity of demand. Through this week I believe the most important concepts are elasticity of supply and demand. Elasticity of demand is the sensitivity of a price change of a product. Elasticity of demand can be influenced by substitutability, proportion of income, luxuries versus necessities, and time. Price elasticity of supply is the responsiveness of producers to a price change in a product.

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