Question

Explain whether the supplies of the following goods are elastic or inelastic? And why?
-Hotel Rooms
-Taxi Rides
-Photographs
Give examples of a fixed cost and variable cost of a Bakery?
How does a firm or business calculate marginal cost?

Answer 1

The elasticity of all three examples can differ...
Although, I'd suggest,

(1) Hotel rooms are elastic and inelastic, depending... If the price of a small shabby hotel room increases by a small amount, most people would be unwilling to pay for it anymore, so it would be elastic. However, if the hotel rooms are luxurious (such as a Suite), no matter how much the price goes up or down, rich people who need the room would still pay the price, and so the room would be inealstic.

(2) Taxi rides are fairly elastic, unless you live in an area whereby a taxi is the only means to get around. It's regarded as elastic since public transport is another option + car rides, and so people would quickly switch to another option if the taxi price increased.
Only on rare circumstances is it inelastic, such as needing a lift home in the middle of the night, where public transport no longer operates, and they are under pretences (such as alcoholism) where they cannot have another option, and will pay any price for the taxi.

(3) Photographs are fairly elastic now adays too, whereas in the past, they may have been more elastic.
Now, photographs are rarely paid for unless people want to put them in photo albums. Instead of paying the hefty price for printed photos now adays, people would rather use internet, flash drives, digital cameras whereby they can just insert the photos straight into the computer and print for themselves.
In the past, however, this was not an option, and so if the price for photos rapidly increased, people would still pay for them as they wanted to save their memories.

Answer 2

As for the fixed and variable costs of a bakery:

Fixed costs: are costs which don't change over the short term period.

eg.. in the bakery terms an over, the rent of the bakery, lighting, a baking tin that lasts longer than let's say 5 years, would be considered as some of the fixed costs of the bakery.

Variable costs: are costs that change over a short term period:

e.g... Flour, eggs, menus, and packing bags are only some of the various variably costs a bakery can incur.

Answer 3

Marginal cost is the extra cost a firm incurs when it makes 1 extra unit of whatever it's making. e.g. 1 extra cake being made each time in the bakery according to the rest of the cakes.
This extra cost is the marginal cost and can be calculated with difficulty by calculating the cost of the current cupcakes and then adding the cost of the extra cupcake being made.

output total cost marginal cost
1 $12 12
2 $20 8
3 $26 6
4 $30 4
5 $32 2