Module 2 Reflections

Using what I have learned about indifference curves and budget lines I can use that in my daily life by decided how to spend my disposable income to where I have the most satisfaction. As well as knowing which combinations I would be indifferent about but I feel like I can use this new knowledge to spend my money more wisely. Some factors that effect the price elasticity of demand are the availability of substitutes, the better and more numerous the substitutes for a good, the more elastic is demand. Percentage of consumers budget also effects price elasticity of demand since the greater the percentage of the consumer’s budget spent on the good, the more elastic is demand. The time period of adjustment effects the price elasticity of demand since the longer the time period consumers have to adjust to price changes, the more elastic is demand. A Rolls- Royce has an elastic price elasticity of demand because the percentage change in price would be greater then the percentage change in quantity, or the quantity effect dominates. Having multiple substitutes for these cars as well as the greater percentage of income consumers spend on a car especially a high end car makes the price elasticity of demand that is elastic. Having the knowledge on price elasticity of demand I could help my high end auto business by knowing that if I lower the price of the automobile, demand will rise and total revenue will rise as well and if I raise the price of the automobile, demand will fall, as will total revenue.