Download Week 2

Welcome to
EC 209: Managerial
Economics- Group A
By: Dr. Jacqueline Khorassani
Study Guide
Week Two
(Note: You must go over these slides and complete every
task outlined here before Thursday, September 13)
1
Chapter Two: This chapter is mainly a review
of what you learned in First Commerce.
Send me your questions.
•
Demand function, schedule, and curve
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What are they?
How does the demand function or schedule look graphically and why?
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Slope
What is the law of demand?
How can the demand curve shift?
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What are the demand determinants other than price?
What is the difference between a change in demand and a change in
quantity demanded?
What is an inverse demand function?
What is the consumer surplus?
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How is it measured?
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Graphically?
Algebraically?
2
Supply function, schedule, and
curve
• What are they?
• How does the supply function or schedule look
graphically and why?
– Slope
– What is the law of supply?
– How can the supply curve shift?
• What are the supply determinants other than price?
– What is the difference between a change in supply and a change
in quantity supplied?
• What is an inverse supply function?
• What is the producer surplus?
– How is it measured?
• Graphically?
• Algebraically?
3
Market Equilibrium
• What is it?
• How does it look graphically?
– What is a shortage?
– What is a surplus?
• How can it change?
– Shifts in supply curve
• Effects on quantity demanded and quantity supplied
– Shifts in demand curve
• Effects on quantity demanded and quantity supplied
– How can a change in equilibrium affect the managerial
decisions?
4
What are the different types of price
restrictions?
• How is a price ceiling different from a price
floor?
• What are some examples of price ceilings
and price floors?
• How does a price ceiling or a price floor affect
the market?
– Graph
• Effects on quantity demanded and quantity supplied
• What is a full economic price under a price
ceiling?
5
Chapter 3: This chapter is also mainly a
review of what you learned in First
Commerce. Send me your questions.
• What does the elasticity measure?
– How can it be shown (measured) using
calculus?
– What is the difference between point versus
Arc (Mid-point) elasticity?
6
What is the own price elasticity of
demand?
• How is it measured?
• Is it positive or negative?
• What is the difference between elastic,
inelastic and unitary elastic demands?
• How is a perfectly elastic demand curve
different from a perfectly inelastic demand
curve?
• Which factors affect it and how?
7
How does the own-price elasticity related
to total revenue?
• The case of elastic, inelastic, and unitary
elastic demands
– Graphical representation
• How does the own-price elasticity related to
marginal revenue?
8
What is the cross price elasticity
of demand?
• How is it measured?
• When is it positive?
• When is it negative?
• Suppose that a firm sells two related good and the price of one
good changes; how can the cross price elasticity help us predict the
changes in the total revenue?
9
What is the income elasticity?
• How is it measured?
• When is it positive?
• When is it negative?
10
Uses of elasticity
• How can the elasticity help the manager
in his/her pricing strategies?
• How can the elasticity help the manger
in predicating the revenue?
• How can the elasticity help the manager
to determine the effects of a change in a
competitor’s price?
11
Mathematical representations of
demand curves
• Linear demand
– What do the coefficients mean?
• How are they related to elasticity?
– How does it look graphically?
• Log-Linear Demand
– What do the coefficients mean?
• How are they related to elasticity?
– How does it look graphically?
12
What is regression analysis?
• How can it be used to estimate demand?
• How can we interpreting the regression
output?
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