For example, if you think of a gas station such as Exxon, station does raise its prices, than its total revenue is just multiplied by quantity. If prices rises by 10 percent, total revenue will change depend upon whether demand turns out to be elastic or inelastic. If demand is elastic and more than 10 percent of the station's customers stop going there, Exxon find total revenue dropping. Its 10 percent increase in price will be more than altered by the larger drop in quantity. However, if demand is inelastic and the station can maintain most of its customers at the higher price, its total revenue will rise. The effect of the higher price will more than alter the small drop in volume.
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In conclusion, microeconomics is based off of our everyday lives. Something so little as buying cigarettes or gas is studied daily by economists, analyzing the responsiveness of the quantity demanded. This surrounds us all day and we never really pay attention to it. When calculating the price elasticity you are giving yourself a different aspect of thinking and judging the world. You can than see what choices would be positive or negative and whether these choices in the long run positively affect your daily life, especially in the recession.
Rosario, Desiree ECO102 Artifact Essay Project Fall 2011.
2) Define the term market structure. Compare and contrast the four different kinds of structures in our economy: perfect competition, monopoly, monopolistic competition and oligopoly.
The selling environment in which a firm produces and sells its products is called market structure. Market structure is known as the organizational and characteristics of a market which focuses on the affect of competition and pricing.