DEMAND
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Demand - Managerial Economics - Lecture Slides, Slides of Managerial Economics
Main topics in Managerial Economics are Demand, Elasticity, Supply, Markets, Efficiency and Cost, Monopoly, Pricing Policy, Strategic Thinking, Imperfect Market, Basic Macroeconomics, Modern Macroeconomic Issues I. This lecture includes: Demand, Rising Gasoline Prices, Managerial Economics, Individual Demand Curve, Consumer Differences, Negative Price Case, Demand and Income, Individual Buyer Surplus, Package Deal, Business Demand Curve
Typology: Slides
2013/2014
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DEMAND
RISING GASOLINE PRICES
Between September 2004 and September 2005, the monthly average retail price of gasoline jumped from $1.85 per gallon to $3.08 per gallon. Sales of full-size SUVs dropped 16.8% over the same time period (with a particularly sharp 42.5% drop for full-size GM SUVs).
MANAGERIAL ECONOMICS
QUESTIONS
How important are gasoline prices to the sales of SUVs and other types of automobiles? How should the auto manufacturers respond to the increasing price of gasoline? Are manufacturer incentives (i.e. price reductions) an effective response? What are the combined effects of incentives and increasing gas prices?
MANAGERIAL ECONOMICS TOOL:
DEMAND
We apply demand to show how the rising price of gasoline has caused decreases in large SUV sales, and how manufacturer incentives can offset these reductions.
INDIVIDUAL DEMAND SCHEDULE
Price Quantity ($ per movie) (movies per month) 10.00 0 7.50 1 5.00 2 2.50 4 0.00 7
0
5
10 1 2 4 7 individual demand curve Quantity (Movies a month) Price ($ per movie)
INDIVIDUAL DEMAND CURVE
ANOTHER TYPE OF INDIVIDUAL DEMAND
CURVE
TWO VIEWS
for every possible price, it shows the quantity demanded for each unit of item, it shows the maximum price that the buyer is willing to pay
CONSUMER DIFFERENCES
individual preferences different demand curves changes in consumer's preferences, eg, age different consumers
HOOVER, 1992
A negative price case:
Hoover’s special promotion -- two free air tickets (worth more than £400) for purchase of appliance over £100. promotion attracted over 100,000 customers Hoover incurred £48 million loss
DEMAND AND INCOME
DEMAND AND OTHER FACTORS
prices of related products substitutes complements advertising