State the general meaning of elasticity

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Question 1 

a) State the general meaning of elasticity as it applies to economics. Define the price elasticity of demand.

b) A storm destroys half the banana crop. Is this event more likely to hurt banana farmers if the demand for bananas is very elastic or very inelastic? Explain.

c) Define the law of diminishing returns. Why is this law considered a short-run phenomenon?

d) Although managerial economics is based primarily on microeconomics, explain why it is also important for managers to understand macroeconomics

e) Define scarcity and opportunity cost. What role do these two concepts play in the making of management decisions?

Question 2

a) What are the key points in a short-run production function that delineate the three stages of production?

b) Explain the relationship between the law of diminishing returns and the three stages of production.

c) Explain the relationship between a firm’s short-run production and its short-run cost function. (Focus on the marginal product of an input and the marginal cost of production). 

Reference no: EM131314954

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