Elasticity of Demand and Its Factors for MB0042 MBA Assignment

This is the solved assignment of – “What is Elasticity of Demand? Explain the factors determining it.” It is written for MB0042 (Managerial Economics) SMU MBA assignment. We already have explained about price discrimination and categories of environmental stressors.

Factors Influencing Price Elasticity of Demand:

Nature of Commodity - By the nature of commodity, we divide them into comfort, luxury and necessity. For luxuries and comforts the Ep> 1 because when prices of these commodities decrease, the demand for these commodities will also increase; whereas in case of necessities, the Ep<1 because when the price of these commodities decrease, the demand for these commodities will increase by less than proportionate.

Availability of substitutes – For those commodities which have enough substitutes in the market, the price elasticity is of more than one, because when the price of a commodity has many substitutes, the consumer will shift to the substitute available in the market.

Number of Uses – Those commodities which have many or multiple uses like coal, milk. For such commodities, the elasticity is more than one as they can be used for more than one purpose. So, if the price of such commodity decreases, there will be increase in the demand. But for those commodities which have very less use of limited uses, the demand will be relatively inelastic.

Durability of commodity – Durable goods is those which last for many years. E.g.: motorcycle, TV, washing machines, etc. The price elasticity of demand for durable goods will be more than one because when the price of such commodities increases, the demand will increase, but for the commodities like fish, vegetables etc., which come under perishable goods, the elasticity of demand will be less than one as these commodities cannot be stored. So even if the price decreases, the demand will not increase.

Consumer’s Income – The price elasticity of demand will be relatively elastic for overall commodities which the consumer’s income is high.

Price Discrimination for MB0042 MBA Assignment of SMU

“What is Price Discrimination? Explain the basis of Price Discrimination.” You need to solve the assignment question for MBA Semester 1 MB0042 – Managerial Economics. It is the assignment of fall session. You can check out other assignment questions also such as - Different Categories of Environmental Stressors and Process of Negotiation.

The measurement of this sensitivity in terms of percentage is called Price Elasticity of Demand. According to Marshall, Price Elasticity of Demand is the degree of responsiveness of demand to the chance in price of that commodity.

Perfect elastic demand is a case of theoretical extremity. When a small change in price leads to a very substantial change in quantity demand, the price elasticity is numerically infinite.

When a demand for the product is independent of price, such demand remains unaffected with any magnitude of change in price.

To make relatively elastic simpler, we can say that any small change in price leads to a big change in quantity demanded. It can be an increase or decrease.

When there is less then proportionate change in demand to the change in price, we say that the demand is relatively inelastic that is Ep<1.

In numerical co-efficient of price elasticity of demand in different cases, we find that its value ranges from zero to infinite.

For those commodities which have enough substitutes in the market, the price elasticity is of more than one, because when the price of a commodity has many substitutes, the consumer will shift to the substitute available in the market.

The price elasticity of demand for durable goods will be more than one because when the price of such commodities increases, the demand will increase, but for the commodities like fish, vegetables etc., which come under perishable goods, the elasticity of demand will be less than one as these commodities cannot be stored.

Different Categories of Environmental Stressors for SMU MBA MB0038 Assignment

It is the solved assignment of “The environmental stressors have a great impact on work performance and adjustment of the individual in an organization. Discuss the different categories of environmental stressors.” You can get the advantage of it for SMU MBA MB0038 assignment like process of negotiation and groupthink.

Environmental and internal conditions that lie beyond an individual’s control are called environmental stressors. Such stressors can have a considerable impact on work performance and adjustment. We can organize environmental stressors into the following categories:

Task Demands: Task demands are factors related to a person’s job. They include the design of the individual’s job, working conditions, and the physical work layout. Changes and lack of control are two of the most stressful demands people face at work.

Role Demands: The social-psychological demands of the work environment may be every bit as stressful as task demands at work. Role demands relate to pressures placed on a person as a function of the particular role he or she plays in the organization.

Role conflict results from inconsistent or incompatible expectations communicated to a person. The conflict may be an inter-role, intra-role or person-role conflict.

Inter-personal Demands: Interpersonal demands are pressures created by other employees. Lack of social support from colleagues and poor interpersonal relationships can cause considerable stress, especially among employees with a high social need. Abrasive personalities, sexual harassment and the leadership style in the organization are interpersonal demands for people at work.

Physical Demands: Non-work demands create stress for people, which carry over into the work environment or vice versa. Workers subject to family demands related to marriage, child rearing and parental care may create role conflicts or overloads that are difficult to manage. In addition to family demands, people have personal demands related to non-work organizational commitments such as religious and public service organizations.

Process of Negotiation for MB0038 MBA Assignment

The solved assignment is being prepared – “Explain the process of negotiation” question. This is the assignment of SMU MBA MB0038. You can read about groupthink and classical era for evolution also.

Negotiation is the process through which the parties to a conflict define what they are willing to give and accept in an exchange. Negotiation permeates the interactions of almost everyone in groups and organizations. If the conflict is complex, the negotiation process may incorporate different strategies for different issues: avoiding some, compromising on others, and so on.

Steps in Negotiation:

Preparation: Preparation for negotiations should begin long before the formal negotiation begins. Each party gathers information about the other side – its history, likely behavior, previous interaction and previous agreements reached by the parties.

Evaluation of Alternatives: The two sides attempt to identify the bargaining range. The bargainers determine the alternatives acceptable to them and also identify their best alternative if a negotiated settlement is not reached.

Identifying Interests: Negotiators act to satisfy their own interests which may include substantive, relationship, personal or organizational ones. The person or group must assess the other party’s interests and then decide how to respond to those interests in their offers.

Making Trade-offs and Creating Joint Gains: Bargainers use trade-offs to satisfy their own and other’s interests. Either position would meet the interest of maintaining a certain standard of living.

Negotiating Approaches:

Distributive Bargaining: Distributive bargaining is an approach in which the goals of one party are in direct conflict with the goals of the other party.

Integrative Negotiation:

Under this approach to negotiation, the parties’ goals are not seen as mutually exclusive; the focus is on making it possible for both sides to achieve their objectives.

Third-Party Negotiations:

When individuals and group reach a stalemate and are unable to resolve their differences through direct negotiations, especially when a conflict is emotionally charged, they may turn to a third party to help them find a solution.

Negotiation is also one of the tactics. It is the process through which the parties to a conflict define what they are willing to give and accept in an exchange.

An Explanation about Groupthink for MB0038 SMU MBA Assignment

It is the solved assignment of – “What is groupthink?” question. Student of SMU MBA MB0038 can use the solved assignment if it is useful for them. I have already shared classical era for evolution of organization behavior and factors of influencing perception.

According to Irving Janis, groupthink is “a deterioration of mental efficiency, reality testing, and moral resulting from in-group pressures”. Thus, the overemphasis on consensus and agreement leads members to be unwilling to evaluate group members’ ideas critically. This hinders decision-making and becomes an obstacle to group productivity. Certain conditions favour the development of groupthink.

1) The first condition is high cohesiveness. Cohesive groups tend to avoid conflicts and to demand conformity.
2) The second is other antecedents including directive leadership, high stress, insulation of the group and lack of methodical procedures for developing and evaluating alternatives.

A group suffering from groupthink displays recognizable symptoms.

Symptoms of Groupthink and how to prevent it:

Illusions of invulnerability: Group members feel they are above criticism. This symptom leads to excessive optimism and risk taking.

Illusions of group morality: Group members feel they are moral in their actions and therefore above reproach. This symptom leads the group to ignore the ethical implications of their decisions.

Illusions of unanimity: Group members believe there is unanimous agreement on the decisions. Silence is misconstrued as consent.

Rationalization: Group members concoct explanations for their decisions to make them appear rational and correct. The results are that other alternatives are not considered, and there is an unwillingness to reconsider the group’s assumptions.

Guidelines for Preventing Groupthink:

Ask each group member to assume the role of a critical evaluator by actively voicing objections or doubts.

Have the leader avoid stating his or her position on the issue prior to the group decision.

Crate several groups that work on the decision simultaneously.

Bring in outside experts to evaluate the group process.

A number of methods for countering social loafing exist, such as having identifiable individual contributions to the group product and member self-evaluation systems. For example, if each group member is responsible for a specific input to the group, a members’ failure to contribute will be noticed by everyone.