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The Case: MGA is a leading manufacturer and exporter of the Automotive and agricultural components. This company was established in 1979. MGA created strong relationship with its clients by providing them quality products. MGA was established by professional engineers to response the challenges of rapid growth of automotive and agricultural sector of Pakistan. MGA got international recognition by exporting automobile parts to European Union. MGA manufactures silencers, Lever parking Brakes, Sheet Metal. Cooperative business partners of MGA are HONDA, SUZUKI, MASSEY and other valuable brands. MGA is very cost efficient company. As demand of automotive parts is very high due to which MGA quickly respond.

Requirement: Being a student of Economics explain if cost elasticity of MGA is high then how it will impact the average cost of the company? Also explain how low cost elasticity represents diminishing returns?

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