Pricing ACCA F5 lecture, Part 2a
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I do not like this part of the exam at all… 馃檨
I’m with you.. It’s a part with the paradox – seems obvious yet so obscure and elusive
Bad times my friend. Second time around I’m understanding it more. Whether that has something to do with not doing two papers at once which isn’t diluting my time or not… We shall see.
ATB
Dear John,
For example 4, may I ask what would be the action if, a, was left as a positive figure and not 0?
Many thanks
I am not sure what you mean, because a is not zero.a is the selling price that would result in the demand being zero.
As the selling price is reduced the demand will increase.
Hi John,
Example 4, page 28. I’m not quite sure how you got 18.4 by adding 6.4 to both sides of the equation. Can you clarify please?
Thanks
Carmel
They sell 16,000 units at a price of $12.
The maximum price (a) is the price at which the demand is zero – i.e. demand lower by 16,000.
For every 2,500 lower demand, the price is increased by $1. So for 16,000 lower demand, we need to increase the price by 16,000/2,500 x $1 = $6.40
So maximum selling price (a) = 12 + 6.50 = $18.40
Of course, thanks John.
You’re welcome, Carmel 馃檪
I’m stuck on example 6 chapter 7. Selling price 拢100 p.u demand 20,000 per annum. For every 拢2 change in selling price demand will change by 2000 units. On looking at the answer P=120-0.001Q I get where the 0.001 comes from but where do you get the 120 from?
Thanks
Vikki
The best way to remember it is : a = current selling price + b (current demand)
Sorry can you expand please selling price is 拢100 plus current demand? Isn’t that 20,000 pa because b = 拢2/2000.
I’ve woken up sorry I didn’t multiply 0.001 with demand of 20000 to give 20+100=120
Hi i have a lil doubt… minus minus is plus …so how we got -2500 b …we supposed to add 16000 and 13500 and get -29500 instead
Minus minus is indeed a plus.
However, we are taking minus 16,000 plus 13,500.
-16000 + 13500 = -2500
(look again – it is minus 16000!)
Good job! Thank you Lecturer you are so loud and clear!
i love this. thank you
Conventional way of calculating the slope of the demand curve is Changes in Quantity/Changes in Price. Why does ACCA Text use Changes in Price/Changes in Quantity? However, I do understand a slope of a straight line is Changes in Y/Changes in X.
I don’t know why you say the conventional way of calculating the slope is change in demand/change in price.
For the price elasticity of demand, then it is demand / price, but the conventional price/demand equation is P = a – bQ for which the slope is b which is change in price/change in demand.
Thank you very useful lecture, any chance adding/providing video lecture on Example 3 Price elasticity? Its on the notes.
Very nicely explained…..:))
very very easy way to calculate the b ,a….?the formula in books is very hard to remember.
Good Explanation. Good Job!
What’s wrong? The video always break down in process? How to avoid this. Thanks!
Example 5 says reduction in price causes increase in demand rather than increase in price and decrease in demand. So shouldn’t the equation be 10-0.01Q??
@musema, Because we assume that the relationship is linear, a reduction in price causes an increase in demand, and an increase in price causes the same reduction in demand.
The equation cannot be P = 10 – 0.01Q, because that would mean that the current demand of 2000 would give a selling price of 10 – 20 = -10!!!
The lecture is correct.
As I see, “Price elasticity” topic is not mentioned in the videos to chapter 7. Or I missed it?
@natasya, You are right – it is not mentioned. I will re-record it shortly but until then you can find it in the course notes.
lovely. good job
@
hasnaat hai
good work from you guys.may God bless you
very well explained, great job!
thanks,i perfectly understood