o What are the determinants of price elasticity of demand ? Identify at least tluee examples .Based on the outcome of the simulation ,explain how price elasticity can impact pricing decisions and total revenue of the firm. 0 Based on the results of the simulation , can policy market interventions cause consumer or producer surplus ? Explain why using specific reasoning In the Competitive Markets simulation , we had to sell oranges for more than what it cost us to produce them in order to make a profit . I didn't realize that the cost of the oranges increased every round , so [didn't get the total prot [was hoping for. As far as the Externalities simulations , you were trying to sell robot clogs . In the simulation without policy interventions , you had to figure out what price to sell the robot dogs in order to make prot . Every dog sold has a "nuisance "cost which is outcomes affected by independent variables .The simulation with policy interventions is basically the same , only you need to take into consideration the interventions that changes the course of your results or production There are a few different policy interventions that will impact the supply and demand equilibrium for a product . Either a price ceiling ,a price floor , or a tax can be put on goods or services. Let's say, for example, a price ceiling was put on a product. If this price ceiling was above the market price I no effects will be big enough to notice , but if the price ceiling is below the market price ,that would leave you uith a shortage of goods .This price ceiling being below the market price doesn't allow for the amount demanded to equal up with the amount supplied . There are a few determinants of price elasticity .One of them are availability of close substitutes This determinant can happen for a lot of goods or services .Toothpaste brands is my favorite example to use because most people don't care which toothpaste they use,or maybe they have a brand that they specically don't like but,most people aren't picky when it comes to toothpaste Crest brand toothpaste, let's say, is an elastic item. It is easier to switch between brands of toothpaste when price rises or one goes on sale . Another determinant is necessities versus luxuries .A doctor is able to raise or lower his price , within reason , without losing ml of his customers .When you are sick or hurt you don't shop around for what doctor has the best rates at the time, you just go to your regular doctor. Before you'd buy an HD TV, on the other hand, you'd do some research to find the best price , and if you couldn't find a good price ,then you most likely wouldn't get the TV. TV's are not a necessity. Another determinant of price elasticity is time horizon .Ifeel the biggest thing uith the time horizon determinant is that as time goes on, people do more research and then become lmowledgeable on things they weren't last year .As for the car example , everyone has come to the realization that fuel - efficient cars are less harmful to the earth than gasoline is. After this realization people over time started to switch to more fuel efficient cars . Price elasticity of demand can impact pricing decisions and total revenue of the firm . Firms are able to use the price elasticity of demand to gure out if the total revenue will increase or decrease .'When the demand is inelastic ,the price of the product and the total revenue move in the same direction (increase ). When the demand is elach ,the price of the product and the total revenue move in opposite directions .When the demand is unit elastic ,the price changes while
