Research Elasticity Information For Two Goods ✓ Solved

Research elasticity information for two particular goods: one with an elastic demand and one with an inelastic demand

Research elasticity information for two particular goods: one with an elastic demand and one with an inelastic demand. Using elasticity information, you gather, predict changes in demand. The United States Department of Agriculture website has a good resource to help with this. 2. Describe how marginal analysis, by avoiding sunk costs, leads to better pricing decisions. 3. Explain the importance of opportunity costs to decision-making and how opportunity costs lead to trade. 4. Evaluate how better business decisions can benefit not just the producer but the consumer and society as a whole. In your evaluation, contrast the deontology and consequentialism approaches to ethics. Your essay must be at least three pages in length (not counting the title and references pages) Adhere to APA Style when writing your essay, including citations and references for sources used. Be sure to include an introduction. Please note that no abstract is needed.

Sample Paper For Above instruction

Introduction

Understanding decision-making in economics is fundamental for both producers and consumers. The concepts of elasticity, marginal analysis, and opportunity costs play a crucial role in shaping rational economic choices. Additionally, ethical frameworks like deontology and consequentialism help evaluate the moral implications of business decisions. This essay explores these concepts and their impact on fostering better business and societal outcomes.

Elasticity of Demand: Elastic and Inelastic Goods

Elasticity measures the responsiveness of quantity demanded to price changes. Goods with elastic demand see a significant change in quantity demanded with a small price change, whereas inelastic goods experience minimal demand fluctuation despite price variations. According to data from the United States Department of Agriculture (USDA, 2022), luxury foods like organic fruits tend to have elastic demand because consumers can substitute them with less expensive alternatives. Conversely, necessities like insulin exhibit inelastic demand, as consumers require the product regardless of price changes.

The elasticity for a particular good can be quantified using the price elasticity of demand coefficient, calculated as the percentage change in quantity demanded divided by the percentage change in price. For example, if a 10% decrease in the price of organic bananas causes a 20% increase in quantity demanded, the price elasticity coefficient would be -2, indicating elastic demand. Conversely, if insulin prices change by 10%, but demand remains unchanged, demand is perfectly inelastic.

Predicting demand shifts based on elasticity allows businesses to strategize pricing. For elastic goods, lowering prices can significantly increase total revenue, whereas for inelastic goods, increasing prices may not substantially decrease demand but could boost profits.

Marginal Analysis and Avoiding Sunk Costs

Marginal analysis involves evaluating the additional benefits and costs of a decision. Focusing on marginal costs and marginal benefits enables firms to optimize their pricing and production strategies. Importantly, avoiding sunk costs—costs that cannot be recovered—ensures that decisions are based solely on future benefits rather than past expenditures.

For instance, a company contemplating the production of an additional unit considers the marginal cost of production versus the marginal revenue it will generate. By disregarding sunk costs, which are irrelevant to current decision-making, firms can avoid biased decisions that could lead to losses or suboptimal pricing strategies. This approach fosters efficient resource allocation and maximizes profit (Case & Fair, 2021).

For example, a restaurant that has already invested in remodeling cannot recoup these costs, but decisions about menu pricing should be based on the marginal profitability of dishes rather than the sunk remodeling costs. This helps in setting prices that align with demand elasticity and capacity constraints.

Opportunity Costs and Trade-offs in Decision-Making

Opportunity cost represents the value of the next best alternative foregone when making a decision. Recognizing opportunity costs is vital for rational decision-making because it frames choices in terms of potential benefits sacrificed.

For example, a farmer choosing between planting corn or soybeans must consider the profit potential of each crop, including market demand, prices, and resource availability. The opportunity cost of selecting corn is the profit lost by not planting soybeans. This concept encourages decision-makers to evaluate options thoroughly, leading to more efficient use of resources (Mankiw, 2020).

Opportunity costs also give rise to trade. For instance, countries may focus on producing goods for which they have a comparative advantage, trading with others to maximize overall welfare. Trade based on opportunity costs enhances efficiency, promotes specialization, and benefits society by increasing the availability and variety of goods.

How Better Business Decisions Benefit Society and the Ethical Perspectives

Effective decision-making in business has benefits beyond profit maximization. It can lead to innovation, sustainability, job creation, and social well-being. A decision grounded in ethical principles ensures that business practices align with societal values.

From a deontological perspective, ethical decisions are based on duties and principles, regardless of outcomes (Kant, 1785). For example, a business adhering to honesty and fairness in transactions fulfills its moral duties. In contrast, consequentialism assesses decisions by their outcomes, advocating for actions that maximize overall happiness and reduce suffering (Mill, 1863). This utilitarian approach suggests that the best business decisions are those that enhance societal welfare, even if they conflict with rigid principles.

An example is corporate social responsibility initiatives, such as environmentally sustainable practices. While sustainability may entail increased costs (a "duty" to protect the environment), the overall societal benefit—preserving natural resources and reducing pollution—aligns with utilitarian ideals.

Integrating ethical frameworks with business strategy leads to long-term sustainability, customer trust, and societal approval. Ethical decision-making enhances brand reputation, reduces legal risks, and promotes social equity, ultimately benefiting consumers, producers, and society.

Conclusion

Understanding elasticity, marginal analysis, opportunity costs, and ethics is essential for effective decision-making in economics and business. Elasticity informs pricing strategies for different goods, while marginal analysis and opportunity costs guide resource allocation and trade-offs. Ethical considerations rooted in deontology and consequentialism shape responsible business practices, leading to societal benefits. These interconnected concepts foster smarter, more ethical, and sustainable economic decisions that benefit not only producers but also consumers and society as a whole.

References

• Case, K. E., & Fair, R. C. (2021). Principles of Economics (13th ed.). Pearson.
• Kant, I. (1785). Groundwork of the Metaphysics of Morals.
• Mankiw, N. G. (2020). Principles of Economics (8th ed.). Cengage Learning.
• Mill, J. S. (1863). Utilitarianism.
• Smith, A. (1776). The Wealth of Nations.
• U.S. Department of Agriculture (USDA). (2022). Economic Research Service Reports.https://www.ers.usda.gov
• Varian, H. R. (2014). Intermediate Microeconomics: A Modern Approach (9th ed.). Norton.
• Frank, R. H. (2019). Microeconomics and Behavior (9th ed.). McGraw-Hill.
• Tirole, J. (1988). The Theory of Industrial Organization. MIT Press.
• Sen, A. (2009). The Idea of Justice. Harvard University Press.