Elasticities and Market Structure

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Business Finance

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Primary Task Response: Write 600–800 words that respond to the following questions with your thoughts, ideas, and comments. Be substantive and clear, and use examples to reinforce your ideas.

Additional Information: The board of directors at AutoEdge is actively discussing several options to address flagging revenue. One option continues to surface during each board meeting; that is, relocating the manufacturing operation back to the United States. Longtime Chief Financial Officer, Ingrid Adams, leads the group that is in favor of this option.

Ingrid Adams approaches you in the company break room.

"Hello," she says. "I'm glad I saw you."

"Hi," you say. "What can I do for you?"

"I have a question about economics," she says. "I think you can help me explain something to some shareholders on the board."

"Economics! My favorite subject," you say. "What's your question?"

"If AutoEdge decided to increase its prices and return to the United States," she says, "how would this action affect consumer demand? I want to know your opinion about elasticity."

"Sure," you say. "So you want to know if the elasticity for auto parts is considered to be relatively inelastic, relatively elastic, unitary elastic, perfectly elastic, or perfectly inelastic. Right?"

"Exactly," she says.

"I have an opinion," you say. "Do you want to talk about it now, or do you want something in writing?"

"Something in writing would be best," she says. "Would you explain your opinion so that I can respond to questions from other members of the board, too?"

"I'd be glad to," you say. "I'll put something together this afternoon and get it to you before I leave today. Is that soon enough?"

"Perfect," she says. "Thanks for your help."

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Explanation & Answer

please find the attached file. always a pleasure. good bye

Running head: PRICE ELASTICITY IN AUTOMOBILE INDUSTRY

Price Elasticity in Automobile Industry
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PRICE ELASTICITY IN AUTOMOBILE INDUSTRY

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Elasticity is what happens to the demand of a good by customers when prices of the good
tend to increase. Consumers will react to the change of goods either positively or negatively.
Consumers will react by either purchasing less of the good or substituting them with other goods
serving the same purpose. However this does not happen to all goods because some of the goods
cannot be substituted with others. The Automotive industry is one of those industries whose
elasticity cannot be affected by substitution of goods since it’s inelastic. The industry is being
considered a necessity in the modern day world where everyone wants to own a vehicle may it
be cheap or expensive. People wi...


Anonymous
Great content here. Definitely a returning customer.

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