Grader Instructions Excel 2016 Project Chapter 3 Problem 7

Grader Instructionsexcel 2016 Projectchapter 3 Problem 7 1project D

Calculate the pattern of price elasticity of demand along the demand curve using Excel 2016. Specifically, use cell references or formulas to compute the point price elasticity of demand at specific price and quantity points, and identify the ranges of prices where the demand is inelastic, unit elastic, and elastic. Enter these ranges into designated cells by referencing the relevant data, and ensure the formulas are dynamic and not hard-coded values. Save and close the workbook after completing the tasks.

Paper For Above instruction

Analysis of price elasticity of demand along a demand curve provides crucial insights into consumer responsiveness to price changes. This study aims to utilize Excel 2016 to calculate and analyze the pattern of price elasticity across different price points, elucidating the inelastic, elastic, and unit elastic ranges within the demand curve.

To achieve this, the primary task involves computing the point price elasticity of demand at various price and quantity points along the demand curve. The elasticity measure, defined as the percentage change in quantity demanded divided by the percentage change in price, can be calculated using the formula:

Elasticity = (dQ/dP) * (P/Q)

Where P is the price, Q is the quantity demanded, and dQ/dP is the derivative of demand with respect to price. In the context of Excel, the point elasticity at a given data point can be approximated using finite differences, or if the demand function is known, directly deriving the elasticity formula within the cell.

In the provided Excel worksheet, the user starts by inputting the data points, which include prices and quantities. Using cell references, the elasticity of demand is computed at each data point (e.g., in cell E10) by referencing the price (cell C10) and quantity (cell D10). It is essential to use relative and absolute references appropriately to ensure formulas copy correctly down the column from row 10 to row 28, thereby automating the calculations for each demand point.

The next step involves classifying the demand at various prices as elastic, inelastic, or unit elastic. In cells H31 and J31, the ranges of prices where demand is inelastic are entered by referencing the calculated elasticities. These ranges are determined by identifying where the elasticity values are greater than 1 (elastic) or less than 1 (inelastic). The range of prices corresponding to inelastic demand (elasticity less than 1) should be listed from the lowest to highest price in these cells.

Similarly, in cell H32, the specific price point at which demand is unit elastic (elasticity equals exactly 1) is referenced. This price acts as a critical threshold between inelastic and elastic demand. The ranges of prices at which the demand is elastic (elasticity greater than 1) are specified in cells H33 and J33, again from the lowest to the highest values, based on elasticity calculations.

Throughout the process, dynamic referencing ensures that any updates to the underlying data automatically update elasticity calculations and the classification of demand elasticities. This approach provides a clear and responsive analysis of how demand responds to price variations along the demand curve.

After completing these calculations and classifications, the workbook should be saved with all formulas intact. The workbook must then be closed, and the file submitted as per instructions.

References

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