• Write a 500 to 750-word report on how the price elasticity of demand can be used to determine whether a private-sector firm should change the price of a product or service it produces.
Select a product or service produced at your workplace, if appropriate. Please note: Products/services produced by private-sector for-profit businesses are usually the best choices for this assignment. Still, some products/services produced by not-for-profit organizations, such as UIU (educational services), will also work well. If your workplace is not appropriate for this assignment, then select another workplace/organization that you are familiar with. Do not select a product/service that is given away for free or is paid for by third-parties, such as health insurance providers. Also, do not select a product/service provided by government agencies.
The following bullets include some words that are in bold — use these words as first-level headings with appropriate capitalization. Your paper should:
o Include a brief introduction and a conclusion. See the note, Introductions and Conclusions, for more information on introductions and conclusions.
o Define the term “price elasticity of demand.” Discuss how an increase in the price of an inelastic product/service would affect quantity demanded (not demand) and total revenues. Also briefly discuss how a decrease in the price of an elastic product or service would affect quantity demanded and total revenues.
o Discuss factors that affect the price elasticity of demand of the product/service you selected including: (1) the availability of substitutes for the product/service, (2) the amount of time consumers have to adjust to a change in price, (3) the proportion of the consumer’s budget spent on the product/service, and (4) the degree to which the product/service is a luxury or a necessity.
o As part of your conclusion, evaluate whether the price elasticity of demand of the product/service you selected is elastic or inelastic. Also recommend whether or not the firm/organization that produces the product/service should change the price of the product. Justify your recommendation with a discussion of how a price change would affect total revenue. Please note: Your conclusion should also review all the major elements of your report.
