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3 years ago

Why will the coefficient for the price elasticity of demand always be a negative number?

1 answer:

8 0

The coefficient for the price elasticity of demand is normally negative because the demand curve is downward sloping. 

Price elasticity of demand:

Shows how quantity demanded changes as a result of a change in price
Is calculated by dividing the change in quantity demanded by the change in price

For normal goods, an increase in price leads to a decrease in quantity demanded. This is why the demand curve is downward sloping. If price goes up, quantity demanded will go down.

This change in quantity demanded will be shown as a negative number which means that when it is divided by the change in price, the price elasticity coefficient will be negative.

In conclusion, the price elasticity coefficient is usually negative because the demand is negative when prices increase.

Find out more at brainly.com/question/24261490.

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Rosario Company, which is located in Buenos Aires, Argentina, manufactures a component used in farm machinery. The firm’s fixed

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Answer:

- BEP in unit: 4,000 units;

- In case fixed cost increases by 10%, New BEP in unit: 4,400 units.

- Net income: 1,000,000p.

- BEP in units if sale price to decrease : 8,000 units => Price change should not take place as it moves the company from making 1 million peso profit to a loss as sales in units (1,200 + 5,000 =6,200) is lower than break-even point ( 8,000 units).

Explanation:

Please find detailed calculations as below:

- BEP in unit is calculated as Fixed cost/ Margin earned by one product = 4,000,000/(3,000 - 2,000) = 4,000.

- New BEP in unit is calculated as New Fixed cost/ Margin earned by one product = (4,000,000 x 1.1)/(3,000 - 2,000) = 4,400.

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- BEP in units if sale price to decrease: Fixed cost/ Margin earned by one product = 4,000,000/(2,500 - 2,000) = 8,000.

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3 years ago

Hotaling Corporation is analyzing a capital expenditure that will involve a cash outlay of $146,040. Estimated cash flows are ex

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Answer:

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Explanation:

The IRR or internal rate of return is the rate at which NPV or Net Present Value of the investment becomes zero. We are provided with the initial outlay for the project and the annual cash inflows along with time period. Using the annuity factors given below, we need to find out the factor which makes the NPV zero. The NPV is calculated as follows,

NPV = Present Value of Cash Inflows - Initial Outlay

We can try out each annuity factor and see what NPV is generates.

1. 6% rate (Annuity factor = 5.582)

NPV = (30000 * 5.582) - 146040

NPV = $21420

2. 8% rate (Annuity factor = 5.206)

NPV = (30000 * 5.206) - 146040

NPV = $10140

3. 10% rate (Annuity factor = 4.868)

NPV = (30000 * 4.868) - 146040

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3 years ago

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