Assignment 3 Long-Term Investment Decisions Meaning

1 Elasticity of Demand The demand of any product depends on the pricing strategy being followed by the company along with some other factors like nature of product i.e. necessity or luxury, availability of substitutes, switching cost etc. If the product is a necessity usually it has inelastic demand. Inelastic demand refers to the situation where one unit increase or decrease in the product’s price cause less than one dollar change in the units demanded of that product ( Kreps, D. M. 1990). If product is a luxurious, its demand is usually elastic in nature. Elastic demand means when one unit change in the price of a product cause more than one unit change in its quantity demanded. E.g. the automobiles and mobiles have elastic demand while salt and sugar have inelastic demand. The product under consideration is low calorie microwavable food items whose price elasticity as was provided in previous assignment was: Own price elasticity (e p ) = ∂Q ∂ P × P Q ∂Q ∂ P = -10, P = 8000, Q = 131000 Own Price elasticity (e p ) = - 10 × 8000 131000 = - 0.61 (approx.) As the 1 unit change in price cause less than 1 unit change in quantity demanded of low calorie microwavable food, thus their demand is inelastic in nature. Thus changes in prices don’t cause huge change in their quantity demanded. Though currently its demand is inelastic in nature but one of the most important factors that need to be considered here is availability of substitutes. As from the last assignment we came to know that large number of sellers of low calorie microwavable food items exist in the industry offering some differentiated features. This shows that substitutes can easily be available and company lies in monopolistic competition industry. In monopolistic competition there exist a large number of suppliers each offering some differentiated feature in their product and thus can change the price to some extent. Thus

W.D. (Wieke) Pot, MSc. is a PhD Candidate at the Public Administration and Policy group at Wageningen University, the Netherlands. Her research addresses long-term decision making in public sector organizations, climate change adaptation, and investment decisions in end-of-lifetime infrastructure. After finishing her Master’s in Public Administration, she worked as a researcher at Wageningen University & Research and as a strategy consultant and manager, amongst others via Boer & Croon.

A. (Art) Dewulf is Associate Professor at the Public Administration and Policy group, Wageningen University & Research, the Netherlands. He studies complex problems of natural resource governance with a focus on the interactive processes of sensemaking and decision making in water and climate governance. He has published extensively on issue framing, decision making under uncertainty, governance of climate adaptation, the role of knowledge in decision making, and the governance of wicked problems.

G.R. (Robbert) Biesbroek is Assistant Professor at the Public Administration and Policy group, Wageningen University & Research, the Netherlands. His research includes causal mechanisms of complex decision making, dynamics of policy (dis)integration of cross-cutting societal issues, tracking policy change using big data tools and methods, and the political and bureaucratic responses to climate change adaptation. He has (co)authored over twenty scientific papers and currently serves as Editor for Regional Environmental Change.

M.J. (Maarten) van der Vlist has a joint appointment as special associate professor adaptive water management at Wageningen University, The Netherlands, and as a principle expert in adaptive water management at Rijkswaterstaat, The Netherlands. Rijkswaterstaat is currently the executive branch of the Ministry of Infrastructure and Environment. His research addresses adaptation to climate change of the spatial layout of areas, with special attention on the replacement of aging water management infrastructure.

C.J.A.M. (Catrien) Termeer is Chair of the Public Administration and Policy group at Wageningen University & Research, the Netherlands. Her research addresses the governance of wicked problems in the policy domains of sustainable agri-food systems, adaptation to climate change, and vital rural areas. Before, she worked at the Erasmus University of Rotterdam; Technical University of Delft; the Ministry of Agriculture, Nature, and Food; and Sioo, a Centre for Organizational Change and Learning. She has also served on the Advisory Council of Rijkswaterstaat.

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