![]() In Figure 1 (a), the demand curve is drawn as highly inelastic. ![]() What does this discovery mean to the firm? Figure 1, below, illustrates two possibilities. Imagine that, as a consumer of legal pharmaceutical products, you read a news story about a technological breakthrough in the production of aspirin: Now every aspirin factory can make aspirin more cheaply than it did before. Conversely, if new and less expensive ways of producing are invented, can the firm keep the benefits in the form of higher profits, or will the market pressure them to pass along the gains to consumers in the form of lower prices? The price elasticity of demand plays a key role inĪnswering these questions. Coffee shops use coffee as a key input, but they have no control over the world market price of coffee. If the cost of a key input rises, can the firm pass along those higher costs to consumers in the form of higher prices? For example, many chemical companies use petroleum as a key input, but they have no control over the world market price for crude oil. It is a challenge to do this, though, when the price of a key input over which a firm has no control rises. ![]() What happens if the firm's production costs change, though? And what is the impact on customers? Most businesses are continually trying to figure out ways to produce at a lower cost, as one path to earning higher profits. Reading: Elasticity, Costs, and Customers Customers and Changing Costs We can see that understanding elasticity helps a firm set a price that maximizes total revenue. You can create a short video using the below, or any other application software of your choice: Once your video is made, please share the link with your instructor. You can use a white board to demonstrate the article and your answers, you can point the camera at your notebook with your graphs as well. Students need to submit a video featuring themselves clearly visible and professionally attired, as if teaching a class. Make sure that within your video you are responding to the 5 questions that have been asked at the end of the passage. You will need to create a short tutorial video not more than 5-8 min long and using your critical thinking and communication skills help your class/audience understand what this passage is talking about. At the end of the passage, some questions are given. ECON 1101 - Technical Literacy Assessment MANDATORY ASSIGNMENT Below is a short passage on Elasticity, costs and Customers.
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