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# Managerial Economics Chap 3

## by Institute of Management Studies UOP on Jan 25, 2012

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## Managerial Economics Chap 3Presentation Transcript

• Chapter 3 Demand Theory www.slideshare.net/themhk
• There is an inverse relationship between the price of a good and the quantity of the good demanded per time period.
• Substitution Effect
• Income Effect
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• www.slideshare.net/themhk Individual Consumer’s Demand Qd X = f(P X , I, P Y , T) quantity demanded of commodity X by an individual per time period price per unit of commodity X consumer’s income price of related (substitute or complementary) commodity tastes of the consumer Qd X = P X = I = P Y = T =
• www.slideshare.net/themhk Qd X = f(P X , I, P Y , T)  Qd X /  P X < 0  Qd X /  I > 0 if a good is normal  Qd X /  I < 0 if a good is inferior  Qd X /  P Y > 0 if X and Y are substitutes  Qd X /  P Y < 0 if X and Y are complements
• Horizontal summation of demand curves of individual consumers
• Bandwagon Effect
• Snob Effect
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• www.slideshare.net/themhk
• www.slideshare.net/themhk Market Demand Function QD X = f(P X , N, I, P Y , T) quantity demanded of commodity X price per unit of commodity X number of consumers on the market consumer income price of related (substitute or complementary) commodity consumer tastes QD X = P X = N = I = P Y = T =
• Market Structure
• Monopoly
• Oligopoly
• Monopolistic Competition
• Perfect Competition
• Type of Good
• Durable Goods
• Nondurable Goods
• Producers’ Goods - Derived Demand
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• www.slideshare.net/themhk Q X = a 0 + a 1 P X + a 2 N + a 3 I + a 4 P Y + a 5 T P X Q X Intercept: a 0 + a 2 N + a 3 I + a 4 P Y + a 5 T Slope:  Q X /  P X = a 1
• www.slideshare.net/themhk Linear Function Point Definition
• www.slideshare.net/themhk Arc Definition
• www.slideshare.net/themhk
• www.slideshare.net/themhk P X Q X MR X
• www.slideshare.net/themhk TR Q X MR<0 MR>0 MR=0
• Demand for a commodity will be more elastic if:
• It has many close substitutes
• It is narrowly defined
• More time is available to adjust to a price change
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• Demand for a commodity will be less elastic if:
• It has few substitutes
• It is broadly defined
• Less time is available to adjust to a price change
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• www.slideshare.net/themhk Linear Function Point Definition
• www.slideshare.net/themhk Arc Definition Normal Good Inferior Good
• www.slideshare.net/themhk Linear Function Point Definition
• www.slideshare.net/themhk Arc Definition Substitutes Complements
• International Convergence of Tastes
• Globalization of Markets
• Influence of International Preferences on Market Demand
• Growth of Electronic Commerce
• Cost of Sales
• Supply Chains and Logistics
• Customer Relationship Management
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