Tariff and Price Elasticity of Demand – US Tariffs on Chinese Imports.
The assignment below is based on The Tariff and Price Elasticity of Demand focusing on the US Tariffs on Chinese imports. The assignment also analyzes the impact on Company Profits.
Tariff and Price Elasticity of Demand – US Tariffs on Chinese Imports
Firstly, you are to familiarize with elasticity. This ls a link with information on elasticity like price elasticity of supply. https://cdnapisec.kaltura.com/index.php/extwidget/preview/partner_id/956951/uiconf_id/38285871/entry_id/1_f4j9no40/embed/dynamic.
Secondly, are going to be the CEO of a company. In anticipation of the upcoming quarterly disclosure of profits, you prepare your Board of Directors for the challenge that US Tariffs on Chinese Imports is having on profits.
Thirdly, you are to analyze the structure We Build Big. We Build Big is one of the largest developers of residential structure in the US. We Build Big, builds every thing from apartment complexes to new single family homes. Critical materials such as lumber, gypsum board, fabricate metal etc are largely imported. We Build Big know that our production process, the supply curve, is relatively inelastic. The concern over profits is that the price elasticity of demand for housing is 1.0.
Lastly, is the demand curve for your product relatively elastic, inelastic or unitary elastic? Demonstrate for your company’s product, by how much the quantity demanded will change if you pass on the 25% increase in cost from the tariff as a price increase for your product. In other words, show your calculation of the percentage change in the quantity demanded given a 25% change in the price. Given your company’s price elasticity of supply and price elasticity of demand prepare a statement for your board as to the potential impact of profits. Who will pay the larger share of the tariff, your firm or your customers.
Tariff and Price Elasticity of Demand – US Tariffs on Chinese Imports
