The price elasticity of demand

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Suppose the price elasticity of demand for cocaine is -0.5. What will happen to the equilibrium price, quantity, and total revenue from cocaine sales if the government succeeds in its efforts to reduce demand? What is likely to happen to the incentive to sell cocaine?
Suppose the government continues to concentrate its efforts on supply reduction and is able to reduce the supply of cocaine. As a result of the reduction in supply the price of cocaine increases by 25 percent. If the price elasticity of demand is -0.5, what is likely to happen to the incentive to sell cocaine?
Based on your answers, explain why one approach might be preferred over the other.

Sample Solution

Price elasticity of demand is a measurement of the change in the consumption of a product in relation to a change in its price. Expressed mathematically, it is: price elasticity of demand=percentage change in quantity demanded/percentage change in price. Economists use price elasticity to understand how supply and demand for a product change when its price changes. Some goods are very inelastic. That is, a reduction in price does not increase demand much, and an increase in price does not hurt demand either. Other good are much more elastic, so price changes for these goods cause substantial changes in their demand or their supply. This concept is of great interest.

considering of the requires speculation for infrastructural offices, IT cost and faculty cost and different assets that is expected for advancement of the correspondence programming item such coordinated Vuelio stage. From there on the net income that is shown up should be audited. In the event that the net income subsequent to deducting the underlying speculation expected from the limited income is positive, the directors can really take up the undertaking. Be that as it may, assuming the income is negative, the directors shouldn’t proceed with the venture (Carmichael, 2011).

Restitution period is the another speculation examination procedure which help to decide the genuine time expected to recuperate the venture made in the undertaking. It is profoundly valuable to the financial backers as they really need fast recuperation of their speculation (Gotze, Northcott, and Schuster, 2016). Thusly, it is for making a legitimate speculation evaluation through this strategy. Directors at Access Intelligence should discover the incomes that is normal from the item that the organization is creating and the venture required. The items which will give faster recuperation of the speculation sum should be contributed. The primary downside of this method doesn’t considers the part of time worth of cash.

Bookkeeping Rate of Return is one more venture examination procedure through which the directors at Access knowledge This specific strategy of speculation examination basically assists with assessing the profits that is normal from the undertaking by thinking about of the speculation expected in a task and incomes that is normal from a task (Dyson, and Berry, 2014).

So generally, directors can involve shifted strategies of venture examination for item that the Access knowledge are creating which assists with dissecting the undertaking’s capacity of getting financial advantage from fluctuated viewpoints. So basically unique venture examination strategy assists in assessing the net money with streaming, some to decide the recuperation season of the underlying speculation and some method help to pronounce the return that is created from the item improvement. Thusly supervisors should utilize

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