(b) Expenditure is a product of price and quantity. It possible for total expenditure on houses overall in Auckland to rise compared with expenditure on the earthquake reconstruction. This is because the demand (quantity) of houses sold will increase considerably as supply also is boosted. The reconstruction will reduce this increase since some people will be forced to go back to Christchurch due to work or other issues. The argument is based on principle of elasticity of supply and demand. The increase in demand and supply of houses in Auckland is the degree of responsiveness in relation to changes in price.
I am the only T-shirts seller (supply low), revenue demand high and the potential customer identify am the only one with the T-shirt (demand high). According to the price elasticity of demand, the price is charged based on the change in quantity demand divided the percentage of change in the price demanded. Therefore, in this scenario the price will be relatively high due to high demand, low supply and profit margin requirements. The superior the price elasticity, the nearer a trader should price their products to competitive products and likewise. From the concept of price elasticity, having a pricing objective is not sufficient. There are other myriad factors considered prior to setting its prices, the customer may buy once and never come back. These factors comprise the demand, the offering’s costs, and the customers target needs. In addition, other factors such as the external environment including competition, the economy, and regulations. Other perspectives of the marketing mix include the nature of the offering, its promotion and distribution. Price elasticity makes individual sensitivity to price alterations, interferes with the demand for the good. The decision to come up with the price is based on how consumer will respond to prices suggestions.
i) In this consumption today and consumption in the future