MANAGERIAL ECONOMICS
A LONG-RUN ADJUSTMENT BY SELLERS CAN BE SEEN GRAPHICALLY AS A SHIFT IN A GIVEN?
SUPPLY CURVE
SUPPYL EXAMPLES
SUPPLY EXAMPLES
SIZE OF INDUSTRY GROWING?
SUPPLY SHIFT TO THE RIGHT
IF PRICE WERE SET AT A HIGHER LEVEL ABOVE MID-EQUILIBRIUM, ITS CONDITION WOULD BE?
SURPLUS
EQUATION FOR SUPPLY ELASTICITY =
Es = Q2-Q1/Q2+Q1 / P2-P1/(P2+P1/2) **PRIMARILY IN AGRICULTURAL MARKET, OIL, DRILLING...
UNDER PRESENT TAX LAWS, WHICH DEPRECIATION METHOD IS USED IN FINANCIAL STATEMENTS?
MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS)
DEFINE FINANCIAL-CAPITAL?
MONEY THAT IS USED TO PURCHASE PHYSICAL CAPITAL/ASSETS
SMALL BUSINESS IN PARTICULARLY RETAIL AND SERVICE ESTABLISHMENTS PROVIDE THE EBST EXAMPLE FOR?
MONOPLISTIC COMPETITION.
ADVERTISING ELASTICITY CAN BE DEFINED AS?
PERCENTAGE CHANGE IN QUANTITY RELATIVE TO A 1 PERCENT CHANGE IN ADVERTISING EXPENCES
SIGNALING THE MARKET - IDENTIFIED AS FROM AN EDUCATIONAL STANDPOINT?
"CERTIFIED" USED CAR
THINK WHAT WHEN YOU SEE THE WORD MARGINAL?
"CHANGE" = MARGINAL
SUPPLY CHAIN MANAGEMENT IS DEFINED AS?
"EFFORTS BY A FIRM TO IMPROVE EFFICIENCY THROUGH EACH LINK OF A FIRMS SUPPLY CHAIN FROM SUPPLIER TO CUSTOMER" ** USUALLY DONE BY FOSTERING BETTER COMMUNICATION AND COPERATION WITH ALL PARTIES. EX: UPS ROUTES DESIGNED TO TAKE MANY MORE RIGHT HAND TURN THEN LEFT HAND TURNS --> LT HADN TURNS ARE SOMETIMES MORE DIFFICULT, INCREASING TIME OF DELIVARY AND POTENTIAL FOR ACCIDENTS.
THE PHENOMONENON OF TWO WORKERS GENERATING MORE OR GREATER PRODUCTION IS?
"INCREASING RETURNS"
DEFINE PHYSICAL-CAPITAL?
"WHAT GETS USED - BUT NOT USED UP" IE: TABLES, CHAIRS, SIGN...
EQUATION FOR INELASTICITY OF DEMAND?
0 < Ep < 1 (IN ABSOLUTE TERMS) % CHANGE IN PRICE IS GREATER THAT THE CHANGE IN QUANTITY. EX: PRICE LOWERED FROM 8-7, QUANTITY RISES FROM 20-11, COEFFICIENT = 0.71
DEFINE ELASTICYT?
PERCENTAGE RELATIONSHIP BETWEEN 2 VARIABLES, THAT IS, PERCENTAGE CHANGE IN ONE VARIABLE RELATIVE TO A PERCENTAGE CHANGE IN ANOTHER.
EQUATION OF ELASTICITY OF DEMAND?
% CHANGE IN QUANTITIY DEMAND/% CHANGE IN INITIAL QUANTITY DEMANDED THE SECOND PART OF THE EQUATION IS: CHANGE IN PRICE/CHANGE IN INITIAL PRICE
WHAT IS PRESENT-PRICE AFFECTED BY? (3)
1. STREAM OF DIVIDENDS 2. DISCOUNT RATE 3. LIFE OF FIRM
EVA EXAMPLE PROVIDED BY INSTRUCTOR?
(RETURN THAT THE FIRM HAS GENERATED IN % - COST OF CAPITAL IN %) MULTIPLIED BY TOTAL CAPITAL EX: $100 VESTED INTO FIRM @ 4% OPPORTUNITY COSTS, AND FIRM GENERATES 10% = 6% DIFFERENCE OUT OF $100 = $6 GAIN
RE-SHORING (OBTAINING JOB THAT WERE RECENTLY LOSS TO OUTSOURCING) OCCURS WHY?
- INCREASED WAGES IN DEVELOPING COUNTRIES (IE CHINA 15% INCREASE PER YEAR) - DECREASE IN VALUE OF THE DOLLAR HAS INCREASED THE COST OF IMPORTING - INCREASED IN ENERGY COSTS - COMMUNICATION & QUALITY CONTROL
ADVANTAGE OF OUTSCOURCING?
- LOWER OPERATING COSTS - INCREASING DEVELOPING COUNTRY'S GDP - GAIN OF EMPLOYMENT & PRODUCTION
DISADVANTAGES OF OUTSOURCING?
- QUALITY OF PRODUCT OR SERVICE MAY BE REDUCED - LOSS OF CONTROL FOR THE ORIGINATING COMPANY - TECHNICAL WORK AND KNOWLEDGE MAY ERODE THE DEVELOPED COUNTRIES COMPETITIVE ADVANTAGE
WHAT CAN WE DO IN THE LONG RUN AS FIRM INCREASES IN SIZE?
- SPECIALIZE IN BOTH LABOR & CAPITOL - VOLUME DISCOUNT (ON T-BONE STEAK, EGGS) - BETTER PRICE PERFORMANCE RATIO PER CAPITOL (LARGE AIR CONDITIONAL > EFFICIANCY) - RAISE FINANCIAL COSTS AND INTEREST RATES... - ISSUE NEW STOCK - PROMOTIONAL COSTS
EX: TO DETERMINE THE POINT OF ELASTICITY GIVEN Q = 10 & P = 13 IS?
-2 X 13 / 10 = -2.6 ??? NOT SURE WHERE -2 CAME FROM???
EX: MARGINAL REVENUE GIVEN: Q = 10 & TR = 130 =
18 - 1(X10) = 8
ELASTICE DEMAND IS GREATER THAN?
1 (DROP NEGATIVE ACCORDING TO INSTRUCTOR)
ASSYMETRIC INFO IS?
1 PARTY HAS MORE INFORMATION THAN ANOTHER PARTY.
GOOD CAPACITY PLANNING (AVOIDING STAGE I OR 111) A FIRM WOULD HAVE TO?
1. ACCURATELY FORCAST DEMAND 2. EFFECTIVE COMMUNICATION WHERE THESE FUNCTIONS ARE OFTEN HANDLED BY SEPERATE WORK GROUPS.
WHAT ARE THE SUPPLY NON-PRICE DETERMINANTS?
1. COST & TECHNOLOGY 2. PRICES OF OTHER PRODUCTS OFFERED 3. FUTURE EXPECTATIONS AMONG SELLERS 4. NUMBER OF SELLERS 5. WEATHER CONDITIONS (AGRICULTURAL RESPONSE)
2 EFFECTS OF DISCOUNT RATES ARE?
1. HOW MUCH BUSINESS RISK? IE RECESSION AND/OR MACROECONOMICS OUT OF FIRMS CONTROL 2. HOW MUCH FINANCIAL RISK? DEBT INFLUENCES = > RISKS < REWARD
THE 3 "PROCESSES" THAT CAN BE USED TO ANSWER THE ABOVE QUESTIONS?
1. MARKET PROCESS: SUPPLY/DEMAND, MATERIAL INCENTIVES (ANSWER THE QUESTIONS FOR WHAT, WHY, AND WHOM) (EX - EBAY) 2. COMMAND PROCESS: USE OF GOV OR SOME CENTRAL AUTHORITY TO ANSWER THE 3 BASIC QUESTIONS (EX: NORTH KOREA) 3. TRADITIONAL PROCESS: USE OF CUSTOMS AND TRADITIONS TO ANSWER THE 3 BASIC QUESTIONS (MULTIPLE OF THESE PROCESSES CAN BE UTILIZED)
ALFRED MARSHALL 4 PRINCIPLES GOVERING THE ELASTICITY OF THE DERIVED DEMAND CURVE?
1. MORE ESSENTIAL IS THE COMPONENT IN QUESTION 2. THE MORE INELASTIC IS THE DEMAND CURVE FOR THE FINAL PRODUCT 3. THE SMALLER IS THE FRACTION OF TOTAL COST FOINF TO THIS COMPONENT 4. THE MORE INELASTIC IS THE SUPPLY CURVE OF COOPERATING FACTORS
2 KEY CONCERNS WHEN CONSIDERING IMPACT OF LAW OF SEMINISHING RETURNS IS?
1. NOTHING IN THE LAW STATES WHEN DIMINISHING RETURNS WILL SATAT TO TAKE EFFECT - THEREFORE A MANAGER WILL ONLY NOTICE/DISCOVER THE POINT OF DIMINISHING RETURN BY EXPERIENCE AND TRIAL AND ERROR. 2. ALL INPUTS ADDED TO THE PRODUCTION PROCES WERE EXACTLY THE SAME IN INDIVIDUAL PRODUCTIVITY.
3 BASIC CONDITIONS THAT DETERMINE INDUCTRY STRUCTURE
1. NUMBER OF FIRMS IN THE INDUSTRY 2. CONDITIONS OF ENTRY 3. PRODUCT DIFFERENTIATION
WHAT ARE THE 4 DIVISIONS OF MARKET TYPES?
1. PERFECT COMPETITION 2. PURE MONOPOLY 3. MONOPOLISTIC COMPETITION 4. OLIGOPOLY
NON-ECONOMIC OBJECTIVES INCLUDE?
1. PROVIDE A GOOD PLACE FOR OUR EMPLOYEE'S TO WORK = GREATER PRODUCTIVITY FROM WORKERS+LESS TURNOVER = > PROFITS FOR ORGANIZATION 2. PROVIDE GOOD PRODUCTS/SERVICES TO OUR CUSTOMERS = MEETING CUSTOMER NEEDS 3. ACT AS GOOD CITIZENS IN OUR SOCIETY = INCREASE CUSTOMER BASE VIA NETWORKING... ***ABOVE RESULTS IS CONSIDERED LONG-TERM PROFIT TACTICS
WHAT ARE THE 3 CONCEPTS THAT MEASURE STOCKHOLDERS WEALTH?
1. STREAM OF CASH FLOW 2. TIME VALUE OF CASH (CASH TODAY IS LESS VALUABLE TOMORROW) 3. OPPORTUNITY COSTS
EXAMPLE LIST OF NON-PRICE DETERMINANTS?
1. TASTE & PREFERENCES (HEALTH BELIEFS) 2. INCOME (> INCREASE = GREATER DEMAND) 3. PRICES OF RELATED PRODUCTS (SUBSTITUTES VS COMPLIMENTS) 4. FUTURE EXPECTATIONS 5. NUMBER OF BUYERS
ALLOCATING USES CAN BE VIEWED AS COMPRISING 3 SEPARATE CHOICES?
1. WHAT - GOODS & SERVICES SHOULD BE PRODUCED & AT WHAT QUANTITIES? (FIRMS POINT OF VIEW) 2. HOW - SHOULD THESE GOODS & SERVICES BE PRODUCED? (MANAGERS POINT OF VIEW) 3. FOR WHOM - WHO'S THE CUSTOMER? (ANALOGOUS, COUNTRY DETERMINATIONS)
SPECIFIC EXAMPLE OF 3 QUESTIONS ABOVE:
1. WHAT: HOW MANY CLASSES/SECTIONS OF A PARTICULAR CLASS SHOULD WE OFFER 2. HOW: SHOULD PROFESSOR HAWKING TEACH THIS CLASS? 3. FOR WHOM: HOW DO WE PRICE THE CLASS/CREDIT HOURS? GRAD VS UNDERGRAD PRICING? W/ CONSUMER IN MIND
PORTERS COST LEADERSHIP APPROACH MATCHES THE?
PERFECT COMPETITION
EXAMPLE 2 UNITS OF "X" AND 2 UNITS OF "Y" YIELD 17 UNITS...ADDING ONE MORE UNIT OF "X" WHILE HOLDING CONSTANT THE AMOUNT OF "Y" YIELDS AN ADDITIONAL?
12 UNITS (Q=29) "SHORT-RUN" PRODUCTION FUNCTION
WHEN A 2ND WORKER IS ADDED, THEIR COMBINED EFFORTS CAN YIELD?
17 - THIS IS UNDER THE ASUMPTION THAT 2 PEOPLE WORKING TOGETHER CAN PRODUCE MORE THAN THE SUM OF THEIR EFFORST WORKING AS SEPERATE INDIVIDUALS. IN THIS EXAMPLE THE MP OF 1 WORKER = 7 & THE AP OF 2 WORKERS = 8.5 MP OF 2NS WORKER IS HIGHER AT 10 WHILE THE MP OF THE FIRST WORKER IS 7
HOW DOES MARKET RESPOND TO ABOVE?
3RD PARTY USAGE - CAR FAX REPORTS
INCREASING BOTH X & Y BY 1 UNIT WILL YIELD?
41 UNITS OF Q/OUTPUT "LONG-RUN" PRODUCTION FUNCTION
2ND WHERE DOES MARGINAL COSTS (MC) EQUAL THE DEMAND CURVE?
8 UNIT ACCROSS - IT IS THE LOCATION WHERE THE COST WILL TAKE $110 DOLLARS TO MAKE AND YOU CAN SALE IT FOR THE SAME AMMOUNT
WHEN SLOPE IS DOWNWARD WE KNOW THAT m = ?
< 0
INELASTIC VALUE =
< 1
4 TEST QUESTIONS: EFFECT IN THE LOCAL AIR TRAVEL MARKET WHEN A NEW AIRLINE IS LURED TO A COMMUNITY
> CARRIERS = > SUPPLY > QUANTITY = < PRICE
EFFECT IN THE HIGHER EDUCATION MARKET WHEN HOUSHOLD DISPOSABLE INCOME INCREASES
> INCREASES = > DEMAND FOR HIGHER EDUCATION = > PRICE = > QUANTITITY
WHAT IS ASSET SPECIFICITY?
????
EFFECT IN THE MARKET FOR CELLULAR COMMUNICATION WHEN TWO OF THE LARGEST COMPANIES MERGE?
@ A MERGER = REDUCTION IN SIZE OF INDUSTRY = < IN QUANTITY = INCREASES IN PRICE EX: TMOBILE MERGER W/ AT&T... IF AT&T HAS 6 MILLION CUSTOMERS AND T-MOBILE HAS 2 MILLION CUSTOMERS, WE CAN ASSUME THAT THE COMPANY WANTS TO HAVE LESS THAN 8 MILLION CUSTOMERS IN THE LONG RUN - HOW WOULD THEY ENCOURAGE OR OUST/REDUCE NUMBER OF CUSTOMERS? BY INCREASING COSTS/PLANNED PACKAGES - WHICH RESULTS IN A GREATER MARKET SWITCHES OR PAY-AS-YOU GO-PLANS. ****NOT SURE WHY THEY WOULD WANT TO LSOE CUSTOMERS THO???
THE MORE ESLASTIC DEMAND CURVE WILL RESULT IN?
A LARGER DECREASE IN QUANTITY AND A SMALLER INCREASE IN PRICE
MAXIMUM PLANT CAPACITY COINCIDES WITH?
A LEVEL OF OUTPUT THAT COSTS A FIRM THE (((LEAST))) AMOUNT PER UNIT TO PRODUCE IN THE SHORT-RUN
AS A RESULT OF HIHG PRICES, ALTERNATIVE OPTIONS TO THE PUBLIC BECAME EVIDENT IE: CAR POOLS, FUJEL EFFICIENT CARS, REDUCED SPEED LIMITS, REDUCE THERMOSAT/ELECTRICITY/IL CONSUMION... WHICH THEN RESULTED IN WHAT IN THE AMRKET?
A LONG-TERM CHANGE/DECREASE IN PRICE
A "RELEVANT COSTS" IS DESCRIBED AS A COST THAT IS AFFECTED BY?
A MANAGEMENT DECISION
OLIGOPOLY IS?
A MARKET DMINATED BY A RELTIVELY SMALL NUMBER IF LARGE FIRMS. PRODUCTS MAY BE STANDARDIZED OR DIFFERENTIATES. THESE MARLETS PRACTICE OVER-PRICE AND OUTPUT STEMS FROM THEIR ABILIT TO DIFFERENTIATE PRODUCTS. HAS SHEER SIZE AND MARKET POWER.
THE DEMAND ELASTICITY FOR BEER OR BREAD WILL TEND TO BE LESS THAN THAT FOR?
A PARTICULAR BRAND OF BEER OR FOR WHITE BREAD GREATER SUBSTITIES FOR BREAD VIA ROLLS, BAGELS... SO IF THE COST OF WHITE BREAD RISES, CONSUMERS MAY CHOOSE OTHER SUBSTITUTES, REDUCING THE DEMAND FOR WHITE BREAD KETCHUP = HIGH ELASTICITY = HEINZ VS HUNTS (EASE OF SUBSTITUTION)
A MOVEMENT DOWN ALONG THE DEMAND CURVE MAY NOT BRING...?
ABOUT THE SAME RESULTS AS A MOVEMENT UP ALONG THE DEMAND CURVE
A POSITIVE PROFIT ABOVE SALARY PAYMENTS AND RUNNING COSTS OF THE FIRM IS CALLED?
ABOVE NORMAL, PURE, OR ECONOMIC PROFIT BECAUSE IT REPRESENTS IN ESCESS OF THE OUT-OF-POCKET COST PLUS THE OPPOTUNITY COST OF RUNNING A BUSINESS.
MARGINAL PULLS AVERAGE UP OR DOWN DEPENDING ON IF IT IS
ABOVE OR BELOW AVERAGE
IF MARGINAL REVENUE PRODUCT IS GREATER THAN THE WAGE WE SHOULD?
ADD ANOTHER WORKER CONVERSELY, IF MRP IS NOT GRAEETER THAN THE WAGE/MARGINAL LABOR COST THAN WE DONT ADD ANOTHER WORKER
DOWNWARD SLOPE OF THE LEARNING CURVE INDICATED?
ADDITIONAL COST PER UNIT DECLINES AS THE LEVEL OF OUTPUT INCREASES BECAUSE WORKERS IMPROVE WITH PRACTICE
WHAT IS THE LAW OF DIMINISHING RETURNS?
ADDITIONAL UNITS OF A VARIABLE INPUT ARE COMBINED WITH A FIXED INPUT, AT SOME POINT THE ADDITIONAL OUTPUT (IE MARGINAL PRODUCT) START TO DIMINISH
POINT ELASTICITY IS DEFINED BY?
ADJUSTS FOR THE AMBIGUITY INHERENT IN THE USE OF THE ARC FORMULA, ECONOMIST WILL USE TO COMPUTE THE ELASTICITY COEFFICIENT - OR - TELL US PERCENTAGE CHANGE FOR QUANTITY FOR PERCENTAGE CHANGE IN PRICE FOR ONE PARTICULAR PRICE
A NONPRICE COMPETITION INVOLVES FIRMS TRYING TO GAIN AN?
ADVANTAGE OVER ONE ANOTHER BY DIFFERENTIATING THEIR PRODUCTS USING SUCH MEANS AS ADVERTISING, PROMOTION, NEW PRODUCTS, CUSTOMER SERVICE.
BANK FACES A PROBLEM WHERE BAD CREDIT RISK ARE MORE LIKELY TO SEEK BANK OANS DESCRIBED AS?
ADVERSE SELECTION - KEY WORD IS "BAD" CREDIT RISK
EXAMPLES OF NONPRICE VARIABLES: "MARKETING TOOLS"
ADVERTISING PROMOTIONS LOCATION & DISTRIBUTION CHANNELS MARKET SEGMENTATION LOYALTY PROGRAMS PRODUCT EXTENTION NEW PRODUCT DEVELOPMENT SPECIAL CUSTOMER SERVICES PRODUCT LOCK-IN OR TIE IN PREEMPTIVE NEW PRODUCT ANNOUNCEMENT
EXAMPLE OF AN INDUSTRY THAT USES LARGE PHYSICAL CAPITAL?
AIRLINES/AIRPLANE
WHEREAS A REDUCTION IN THE FIRMS VARIABLE COSTS (IE REDUCTION IN WAGE RATES OR RAW MATERIALS COSTS) WOULD CAUSE ?
ALL 3 COST CURVES (MC, AVC, & MC) TO SHIFT
IF THE COMMODITY IS A GOOD SUBSTITUTE FOR OTHERS, IS DEMAND ELESTICITY WILL?
ALSO BE HIGH - USUALLY THINGS THAT WE DONT SPEND VERRY MUCH MONEY ON EX: THE ITEMS AT THE CHECK OUT LANE (GUM, CANDY.. LESS PRICE SENSITIVE TO PRICE CHANGES)
OPPORTUNITY-COST IS DEFINED BY?
AMOUNT OF SUBJECTIVE VALUE THAT MUST BY SACRIFICED IN CHOOSING ONE ACTIVITY OVER THE NEXT BEST ALTERNATIVE "GUNS VS BUTTER COMPARISON" "GRADUATE VS EXPERIENCE COMPARISON" "TEACHING IN EUROPE/EXCHANGE RATE COMPARISONS" "RUSSIA/POLITICAL FACTORS COMPARISON"
EQUILIBRIUM QUANTITY =
AMOUNT THAT PEOPLE ARE WILLING TO BUY AND SELLERS ARE WILLING TO OFFER AT THE EQUILIBRIUM PRICE LEVEL
IF OLIGOPOLY FIRM LOWERS ITS PRICE, THIS MAY HAVE?
AN IMMIDEIATE IMPACT ONT HE COMPETITION. DEMAND WILL MOVE ALONF THE MORE ELASTIC DEMAND CURVE AND THEN IT WILL GAIN A RELATIVELY LARGE QUANTITY OF AFDITONAL SALES FOR A RELATIVELY SMALL DECREASE IN PRICE
PRICE OF PETRO EXAMPLE: A LEFTWARD SHIFT (IE: REDUCING THE SUPPLY OF A PRODUCT) WILL RESULT IN
AN INCREASE IN PRICE DUE TO THE REDUCED CONSUMPTION.
A FIRMS LOSS IS A COMNINATION OF ITS FIXED COST
AND NEGATIVE CONTRIBUTION MARGIN
NON-PRICE COMPETITION IS?
ANY EFFORT OT CHANGE DEMAND WITHOUT CHANGIN PRICE (TASTE, INCOME, SUBSITUTES...) AKA STANDARDS OF DEMAND SHIFT EX: THINK OF ALL CRUISE OFFERINGS/OPTIONS
SCREENING DEVICE IN HIRING PROCESS?
APPLICANT WHO HAVE MASTERS DEGREE VS THOSE WHO DONT.
COMPLEMENTS ARE?
ARE PRODUCTS THAT ARE USED TOGETHER EX: POTATOE CHIPS, PRETZELS/MUCHNIESS. PEANUT BUTTER AND JAM IPODS AND EARBUDS TENNIS RACKETS AND TENNIS BALLS
MARGINAL REVENUE CURVE WILL BE TWICE AS STEEP
AS DEMAND CURVE
DEFINE INCOME
AS INCOME RISES, DEMAND FOR A PRODUCT WILL RISE.
MP =
AT AP'S HIGHEST POINT NEED OT LEARN HOW TO EVALUATE PATTERN OF CHANGE IN Q, AP, AND MP ALONG WITH REASONS FOR THE CHANGE INSTRUCTOR EXAMPLE: GRADE POINT AVERAGE OF 85 (AVERAGE PRODUCT), LAST TEST TAKEN WAS 94 (MARGINAL PRODUCT). SINCE THE LAST TEST IS GREATER THAN YOUR AVERAGE THEN THE AVERAGE PRODUCT IS RISING OR INCREASING, OR VICE VERSA.
AS LONG AS MARGINAL COST IS BELOW AVERAGE VARIABLE COST...
AVERAGE VARIABLE COST DECLINES AS OUTPUT INCREASES
WHEN SUPPLY CURVE IS LOW ELASTICITY, RESULTS IN?
CHANGE IN DEMAND WILL HAVE GREATER EFFECT ON PRICE THAN QUANTITY
AS NEW FIRMS ENTER - THE EXISTING FIRM FOCUSES ON?
COST-CONTROL TO KEEP THE AMRKET ADVANTAGE
COST VERSUS TECHNOLOGY?
COSTS IS ASSOCIATED WITH OPERATING COSTS TO PRODUCE A PRODUCT TECHNOLOGY (IE: AUTOMATED DEVICES, SOFTWARE., TIRES..) PRODUCE THE OVERALL COSTS TO PRODUCE A PRODUCT
INITIAL Q1 P1 IS THE?
BASELINE P2/Q2 IS THE COMPARABLE RELATED TO THE BASELINE PUBLIC REPORT NUTRITIOUS VALUE OF PIZZA WILL RESULT IN A SHIFT OF EQUILIBRIUM TO THE RIGHT, PRICE OF THE PIZZA WILL RISE, ALONG WITH # OF PIZZA'S SOLD
WHY DOES CAR DEPRECIATE ONCE YOU DRIVE IT OFF THE LOT?
BECAUSE OF QUESTIONABLE USAGE/PERFORMANCE RECORD - THE ROLES SWITCH AND THE BUYER NOW KNOWS THE VEHICLE AND THE BUYER DOES NOT.
WHY DOES TOTAL COSE INCREASE AT A DECREASING RATE?
BECAUSE THE FIRM IS EXPERIENCING INCREASING RETURNSTO ITS VARIABLE INPUT
IT IS DIFFICULT TO ENTER INTO AN OLIGP[OLY BECAUSE?
BECAUSE THERE IS MORE OPPORTUNITY TO EARN ECONOMIC PRFIT FOR AN EXTENDED PERIOD OF TIME.
A 10 PERCENT INCREASE IN ADVERTISING INCREASES THE CONSUMPTION OF BEEF? PORK? POULTRY?
BEEF = 0.07% PORK = 0.33% POULTRY = 0.5%
EXAMPLES OF AN OLIGOPOLY?
BIS BUSINESS, MANUFACTURING OIL, REFINING, CERTAIN TYPES OF COMPUTER HARDWARE, CHEMICALS, PLASTICS, PROCESSED FOODS, TOBACCO, STEEL, AUTOMOBILE, COPPER, SOFT DRIKS
BONUS MATERIAL VIDEO
BONUS MATERIAL VIDEO
THE TERM STANDARD VARIABLE COSTS IS TYPICALLY DEFINED AS?
BOTH MARGINAL COSTS & AVERAGE VARIABLE COST & ASSUMING BOTH COST FUNCTIONS ARE LINEAR
THE FIRST WORK PRODUCES 7 UNITS OF?
BOTH MP & AP
VARIATIONS IN RETURNS DUE TO THE UPS AND DOWN OF THE ECONOMY, INDUSTRY, AND THE FIRM?
BUSINESS RISK
A MENOPOLY FIRMS ABILITY TO SET ITS PRICE IS LIMITED
BY THE DEMAND CURVE FOR ITS PRODUCT AND, IN PARTICULAR, THE PRICE ELASTICITY OF DEMAND FOR ITS PRODUCT SHOULD BE SET WHERE MR = MC WOULD MAXIMIZE SHORT-RUN PROFITS
LARGEST OUTPUT LEVEL FOR WHICH MINIMUM LRAC IS ACHIEVED, CALLED?
MAXIMUM EFFICIENT SCALE (MaxES)
PRICE GOES FROM 80 -> 100, QUNATITY GOES FROM 20-->18, CALCULATE ELASTICITY?
CALCULATED IN TABLE FORM: CHANGE IN P=20 CHANGE IN QUANTITY = -2 AVERAGE Q = 19 ELASTICITY = 0.47 -2/19/20/90 = .105/.22 = 0.47 REVENUE FOR 1ST PERIOD = (20)(80) = 1600 REVENUE FOR 2ND (100)(18)= 1800 SHOULD OBSERVE REVENUE INCREASE INELASSTIC
SHORTCOMINGS OF COBB-DOUGLAS?
CAN NOT SHOW MARGINAL PRODUCT THRU ALL 3 STAGES CAN NOT SHOW A FIRM OR INDUSTRY PASSING THROUGH INCREASEINGG, CONSTANT, AND DECREASING SCALE CO,MPLICATIONS WITH SPECIFICATION OF DATA TO BE USED IN EMPIRICAL ESTIMATES
EXAMPLE OF EQUATION NOT TESTABLE: SCENARIO 1 (GOOD/PROFIT)
CAPITAL INVESTED = $1000 OPERATING PROFIT = $80 COST OF CAPITOL (INTEREST = 5% EVA (80/1000-0.05)1000 = $30 GAIN
REPUTATION OF SELLER SUCH AS?
CAR MAX - ESTABLISHES REPUTATION OF SALING HIGH QUALITY UED CAR AND PRE-PURCHASED EXPECTATION
CH 3 BONUS VIDEO
CH 3 BONUS VIDEO
CH 8 LECTURE
CH 8 LECTURE
CH 9 LECTURE NOTES
CH 9 LECTURE NOTES
MARGINAL REVENUE PRODUCT (MRP)?
CHANGE IN FIRMS TOTAL REVENUE PRODUCT RESULTING FROM A UNIT CHANGE IN VARIABLE INPUT USAGE (CHAGNE IN TRP/CHANGE IN X) IT CAN ALSO BE COMPUTED BY MULTIPYING THE MARGINAL PRODUCT OF LABOR BY THE PRODUCT PRICE (MP X P) ***EX: IF WE ADD ANOTHER WORKER, HOW MUCH REVENUE IMPACT WILL RESULT?
REVENUE EFFECT FRO PRICE INCREASE VERSUS INELASTIC DEMAND VERSUR ELASTIC DEMAND = EX: PRICE 20 -->40, QUANTITY 100-->80 WHAT IS THE ELASTICITY USING THE ARC FORMULA?
CHANGE IN Q/AVERAGE Q / CHANGE IN P/AVERAGE P = -20/90 / 20/30 = 0.22/0.67 = 0.33 = ELASTICITY PRICE WENT UP DRAMATICALLY, BUT QUANTITY FELL BY JUST A LITTLE - INELASTIC DIVIDE - REVENUE INCREASES
WHEN THE DEMAND CURVE IS LINEAR ITS EQUATION IS?
CHANGE IN QUANTITY/CHANGE IN PRICE = m (SLOPE)
MARGINAL LABOR COST (MLC)
CHANGE IN TOTAL LABOR RESULTING FROM A UNIT CHANGE IN THE NUMBER OF VARIABLE INPUTS USED. BECAUSE THE WAGE RATE IS ASSUMED TO BE CONSTANT REGARDLES OF THE NUMBER OF INPUTS USED, THE MLC IS THE SAME AS THE WAGE RATE EX: PAYMENT THAT WOULD BE ADDITIONAL FOR THE FORTH PHYSICAL THERAPIST
WHAT IS MARGINAL REVENUE?
CHANGE IN TOTAL REVENUE AS QUANTITY CHANGES BY ONE UNIT
HOW DO PRICES/ELASTICITY CHANGE OVER TIME?
CHANGE OCCURES WITH GREATER INCREASE OF SUBSTITUTIONS
CHANGES IN THE NON-PRICE DETERMINANTS RESULT IN?
CHANGES IN DEMAND (IE SHIFT IN THE DEMAND CURVE) ***MEANING IF MORE PEOPLE ARE DEMANDING THE PRODUCT, THEN A PRICE REDUCTION MAY NOT BE NECESSARY, BECAUSE MORE PEOPLE ARE PURCHASING THE PRODUCT AT A HIGHER PRICE ANYWAY = WHICH EQUALS GREATER PROFIT
CHANGES IN PRICE RESULTS IN? (SUPPLY RELATIONSHIP)
CHANGES IN THE QUANTITY SUPPLIED IE: HIGHER THE PRICE, THE HIGHER THE SUPPLY AVAILABLE FOR SALE
CHANGES IN PRICE RESULTS IN? (DEMAND RELATIONSHIP)
CHANGES IN THE QUATITY DEMANDED
CHAPTER 1-2 NOTES
CHAPTER 1-2 NOTES
CHAPTER 11
CHAPTER 11
CHAPTER 2 NOTES
CHAPTER 2 NOTES
CHAPTER 3
CHAPTER 3
CHAPTER 3 LECTURE NOTES
CHAPTER 3 LECTURE NOTES
CHAPTER 4
CHAPTER 4
CHAPTER 6
CHAPTER 6
CHAPTER 7
CHAPTER 7
CHAPTER 8 NOTES
CHAPTER 8 NOTES
CHAPTER 9 NOTES
CHAPTER 9 NOTES
WHAT IS THE ECONOMIC TERM OF A FIRM & WHAT IS ITS PRIMARY GOAL?
COLLECTION OF RESOURCES THAT IS TRANSFORMED INTO PRODUCTS DEMANDED BY CONSUMERS. GOAL: MAXIMIZE PROFITS
1/5TH OF GOODS IN SERVICES IN THE US ARE INFLUENCED BY THE?
COMMAND PROCESSS
HOW DO FIRMS SELECT THE IPTIMAL LEVEL OF OUTPUT?
COMPARE TOTAL REVENUE WITH THE TOTAL COST SCHEDULED AND FIND THE LEVEL OF OUTPUT THAT EITHER MAXIMIZED THE FIRMS PROFIT OR MINIMIZES ITS LOSS
A MONOMPOLY IS NOT?
COMPETITIVE FORM AN ECONOMIC STANDPOINT - BEING THE ONLY FIRM IT HAS THE POWER TO SET ITS PRICE, ONLY CONSTRAINED BY GOVERNMENT REGULATION OR PERHAPS A BREAKTHRU IN TECHNOLOGY ADVANCES
PORTERS 5 FORCE MODEL INFORMATION
COMPETITIVE FRAMEWORK IDEAS: 5 FORCES: 1. THREAT OF NEW ENTRANCE 2. BARGAINING POWER OF BUYER 3. THREAT OF SUBSTITUTE PRODUCTS 4. BARGAINING POWER OF SUPPLIER 5. DIRECT RIVALRY IDEALLY WE WANT THESE ALL TO BE WEAK - INCREASES THE CHANCES OF ECNOMIC PROFIT
FACTORS THAT CAN ADJUST OR CHANGE CONSUMPTION INCLUDE?
COMPETITORS (SUBSTITITUTES) SEASONAL CHANGES (SODA/SUMMER TIME) TEMPORARY VS PERMANENT SPECIALS
WHY IS ASSET SPECIFICITY SO IMPORTANT?
CONSIDER TWO COMPANIES THAT ARE WORKING TOGETHER FOR A SPECIALIZED COST (SPECIALIZED EQUIPMENT..) THIS SPECIALTY REQUIRES THE 2 COMPANIES TO HAVE TO STAY TOGETHER OR TIED TO ONE ANOTHER. FUTURE CHANGES IN THE MARKET MAY LEAD TO OPPORTUNISTIC BEHAVIOR, WHERE ONE OF THE PARTIES SEEKS TO TAKE ADVANTAGE OF THE OTHER. TRANSACTION COSTS IN THESE CASES WILL BE VERY HIGH. ***DIFFERENT THAN GENERAL ASSET EX: SPECIALIZE MACHINE THAT IS ONLY GOOD FOR PRODUCING A SPECIFIC PRODUCT - MAY BE CONTRACTED OUT TO ANOTHER FIRM SO THAT YOU WONT HAVE TO PURCHASE THE ENTIRE MACHINE - TO SAVE COSTS
IN MENOPOLIES, THE FIRM HAS?
CONSIDERABLE AMOUNT OF MARKET POWER, BECAUSE ITS THE ONLY SELLER IN THIS TYPE OF MARKET, IT HAS THE POWER TO ESTABLISH A PRICE AT WHATEVER LEVEL IT WANTS - IT IS THE PRICE MAKER
INCREASING IN TOTAL COST AT A CONSTANT RATE IS?
CONSTANT MARGINAL COST
IF OUTPUT INCREASES BY THE SAME PROPORTION AS THE INPUTS INCREASE, THE FIRM EXPERIENCES?
CONSTANT RETURNS TO SCALE
EQ = 1 =
CONSTANT RETURNS TO SCALE (CRTS)
MARKET PRICES GOING DOWN,
CONSUMER SURPLUS IS INCREASING AND QUANITYTY INCREASES
"READY" IMPLIES?
CONSUMERS ARE PREPARED TO BUY A GOOD OR SERVICE BECAUSE THEY ARE BOTH WILLING (DESIRE/PREFERENCE) AND/OR ABLE ($$$)
DESCRIBE LAW OF SUPPLY, RELATIONSHIP TO LAW OD DEMAND?
CONVERSELY REALTED LAW OF SUPPLY STATES THAT QUANTITY SUPPLIED IS RELATED DIRECTLY TO PRICE, OTHER FACTORS HELD CONSTANT THUS - ANY SCHEDULE OF NUMBERS REPRESENTING A RELATIONSHIP B/W PRICE AND QUANTITY SUPPLIED WOULD SHOW A DECREASE IN THE QUANTITY SUPPLIED AS PRICE FALLS.
EXAMPLE OF PERFECT COMPETITIONS?
CORN, WHEAT, COFFEE, PORK BELLIES, FINANCIAL INSTRUMENTS, STOCKS, BONDS, FOORIGN EXCHANGE, PRECIOUS METALS - IS STANDARDIZED COMMODITIES
SUNK COSTS?
COST THAT DOES NOT VARY IN ACCORDANCE WITH THE DECISION ALTERNATIVES. EX: DIFFERENCE BETWEEN CHANGE WHEN THERE IS A LOSS IN MARKET VALUE. IE. MARKET VALUE DROP FROM 750,000 TO 550,000 = 200,000 DIFFERENCE = SUNK COST *** 550,000 WOULD STILL BE CONSIDERED AS THE "OPPORTUNITY COST" OR RELEVANT COST/INCREMENTAL OPPOTUNITY COST
UNDER THE ECONOMIC CONSUMER SURPLUS GRAPH DESCRIBE AREA UNDERNEITH THE DEMAND CURVE
CUSTOMER WILLING TO PAY 90, MARKET PRICE IS 50 PER UNIT - THAN FIRM IS BENEFITING FROM THE SURPLUS, THE NUMBERS BELOW THE DEMAND CURVE, THERES IS A DEFICIT
WHAT ARE THE 2 BROAD CATEGORIES OF ECONOMICS?
MICROECONOMICS - INDIVIDUAL CONSUMERS AND PRODUCERS IN SPECIFIC MARKETS MACROECONOMICS - AGGREGATE ECONOMY (POLITICS, WORLD FACTORS)
CROSS-SECTIONAL NALYSIS IS USED WHEN?
DATA COLLECTED COVER A NUMBER OF PLANTS IN A GIVEN TIME PERIOD. ***TECHNOOLOGY MAY SKEW RESULTS
TIME SERIES ANALYSIS WOULD BE USED WHEN?
DATA HAD BEEN COLLECTED OVER A PERIOD OF TIME IN A GIVEN PLANT
IF WE HAVE INELASTIC DEMAND - AND WE RAISE OUR PRICE BY 10%, QUANTITY GOES DOWN BY 2% THEN REVENUE WILL?
DECREASE ***TEST QUESTIONS THIS OCCURS WHEN PRICE CHANGE IS LARGER THEN MAGNITUDE/QUANTITY CHANGE
IN THE CASE OF A SURPLUS, SELLER WANTING TO GET RID OF AN ITEM, SELLER WOULD?
DECREASE PRICE TO ENTICE CONSUMER TO PURCHASE/BUY MORE
EQ < 1 =
DECREASING RETURN TO SCALE (DRTS)
A LESS PROPORTIONAL INCREASE IN OUTPUTS IS CALLED?
DECREASING RETURNS TO SCALE
ECONOMIST PROFITS ARE THOSE THAT ARE?
DEFINED AS TOTAL REVENUE MINUS ALL THE ECONOMIST COSTS WE DESCRIBED IN PRIOR SLIDE.
A LONG-RUN ADJUSTMENT BY "BUYERS CAN BE SEEN GRAPHICALLY AS A SHIFT IN A GIVEN?
DEMAND CURVE
IN SHORT RUN - A SHORT-RUN ADJUSTMENT BY "BUYER" CAN BE INVISIONED AS A MOVEMENT ALONG A PARTICULAR?
DEMAND CURVE
IF COEFFICIENT IS LESS THAN -1 OR GREATER THAN 1 THAN?
DEMAND IS SAID TO BE ELASTIC
WHAT IS THE KINKED DEMAND CURVE?
DESCRIBES THE AFFECT OG MUTAL INTERDEPENDANCE BETWEEN OLIGOPOLY FIRMS WHO SET PRICES BETWEEN ITS FIRMS AND DETERMINE DIFFERENCE IN PURCHASE POWER AND ADJUSTMENTS MADE. THE MODEL SPEIFCIALLY DICTATES THAT CUSTOMERS WILL REACT TO PRICE DECREASES AND NOT REACT TO PRICE INCREASES. `
PUBLIC/PUBLISHED STATEMENTS MAY?
DIFFER (CALCULATED DIFFERENTLY THAN) FROM WHAT IS ACTUALLY REPORTED TO THE IRS
IF YOU CANT BE THE FIRST MOVER AND YOU CAN LOWER COSTS FURTHER THAN ANYBODY ELSE, THEN THE FIRM MUST CONSIDER?
DIFFERENTIATE THE PRODUCE - A WAY TO GET OUT OF THE COMEPTITION IN A STANDARDIZED MARKET
THUMB DIRVES, CD'S, DVD ROM ARE ALSO FACING A SHORTAGE DUE TO APPLICATION OF?
DIGITAL STORAGE, MP3 DOWNLOAD...
OUT OF POCKET COSTS ARE REFFERED TO AS?
DIRECT COST OR EXPLICIT COSTS
MANAGEMENT IS?
DISCIPLINE OF ORGANIZING AND ALLOCATING A FIRMS SCARCE RESOURCES TO ACHIEVE ITS DESIRED OBJECTIVES ***EX: MANAGERS WILL DECIDE IF WE ARE GOING BUILD A NEW PARKING LOT, LOCATION, # OF SPOTS, HOW MUCH TO CHARGE?
IF LONG-RUN AVERAGE COST INCREASES AS OUTPUT INCREASES, ECONOMIES CONSIDERE TO BE A SIGN OF?
DISECONOMIES OF SCALE OR DECREASING RETURNS TO SCALE (DRST)
TWO MANAGEMENT POLICIES THAT HAD THE LARGEST EFFECT ON PRODUCTIVITY
DOLLAR SPENT FOR ASSET MAINTENANCE AND TECHNOLOGY IMPROVEMENTS BENEFITS DERIVED FROM JOB SPECIFICATION AND REORGANIZATION
WHEN WE SEE INCREASING RETURNS TO SCALE WE WANT TO?
DOUBLE SIZE OF FACILITY DOUBLE WORKERS * SHOULD RESULT IN MORE THAN DOUBLE OUTPUT OR DOUBLE OUTPUT, IN DOING SO TOTAL COST DOES NOT DOUBLE
a reduction in a firms fixed cost (ir reduction in rental payments) would simply cause the AVERAGE COST CURVE TO SHIFT?
DOWNWARD
INTERNET AFFECTS ON TRANSACTION COSTS?
DRASTICALLY DECREASES COSTS MAKING IT EASIER AND MORE EFFICIENT FOR COMPANIES TO CURTAIL THEIR OWN OPERATIONS AND FARM-OUT MUCH OF THE WORK THEY WOULD HAVE BEEN PERFORMING TO OUTSIDE COMPANIES THAT SPECIALIZE IN SPECIFIC OPERATIONS
LAW OF DEMAND STATES CONSUMERS WILL PURCHASE PRODUCTS WHEN?
DURING PRICE FALL AND RISE OF THE PRODUCT
EVA DEFINED AS?
IF RESULTING NUMBER FROM EQUATION IS POSITIVE -THEN COMPANY HAS EARNED MORE THAN ITS INVESTORS REQUIRE - IE ADDING TO INVESTORS WEALTH. IF COST IS GREATER THAN RETURN, THEN VALUE IS BEING DESTROYED
EQUATION FOR CROSS PRICE ELASTICITY?
E(A,B) = (CHANGE IN QUANTITY A/QUANTITY A) / CHANGE IN PRICE B/PRICE B ***MUST USE ARC ELASTICITY TO SOLVE EX: DOMINOZ PIZZA (PRODUCT B) STARTS OFFERING CHICKEN WINGS - (PRODUCT A). IF PRICE OF PIZZA GOES UP, AND PEOPLE CONSUME MORE CHICKEN WINGS, THEN WE HAVE POSITIVE ELASTICITY. IF PIZZA PRICE INCREASE, AND WINGS SALE LESS THAN PEOPLE ARE CONSUMING THE PRODUCTS SOMEWHERE ELSE (ANOTHER STORE) CONSIDERED AS A COMPLIMENTS. POSITIVE = SUBSTITUTE, NEGATIVE = COMPLIMENT
MOST IMPORTANT DETERMINANT OF ELASTICITY IS?
EASE OF SUBSTITUTION IE: IF THERE ARE MANY GOOD SUBSTITUTES FOR THE PRODUCT IN QUETION, ELASTICITY WILL BE HIGH
IN PERFECT COMPETITION, ENTERING INTO A MARKET IS?
EASY - the same applies for monopolistic competition
WHEN REVENUE IS LESS THAN THE ECONOMIC COST =
ECONOMIC LOSS - & LOSS IS INCURRED. EX: REVENUE = 480K EXPENSES = 500K ECONOMIC LOSS = 20K BUT THE ACCOUNTING PROFIT WOULD BE 30K (480K-450K)
THE STUDY OF THE BEHAVIOR OF HUMAN BEINGS IN PRODUCING, DISTRIBUTING AND CONSUMING MATERIAL GOODS AND SERVICES IN A WORLD OF SCARCE RESOURCES IS CALLED?
ECONOMICS - STUDY OF PRICE, ALLOCATION ANOTHER DESCRIPTION: THE SCIENCE WHICH STUDIES HUMAN BEHAVIOR AS A RELATIONSHIP B/W ENDS AND SCARCE MEANS WHICH HAVE ALTERNATIVE USES. ***KEY TERM SCARCE RESOURCE EX: PARKING SPOTS ON CAMPUS
A KEY INDICATOR OF LONG-RUN AVERAGE COST IS CALLED?
ECONOMIES OF SCALE OR INCREASING RETURNS TO SCALE.
ACCOUNTANT VS ECONOMIST?
ECONOMISTS AND ACCOUNTANTS DON'T AGREE ON CONCEPTS OF COST ACCOUNTANTS - REPORT COSTS ON HISTORICAL BASIS ECONOMIST - CONCERNED WITH BUSINESS RELATED COSTS AND DECISION MAKING THAT WILL RESULT/IMPACT FUTURE RELATED COSTS
PLANTS WITH LARGER CAPACITIES ARE GREATLY INFLUENCED BY?
ECONOMOIES AND DISECONOMIESOF SCALE
IF WE HAVE ELASTIC DEMAND AND WE INCREASE OUR PRICE WE HAVE?
ELASTIC DEMAND - ***REVENUE WILL FALL**
CHANGE IN QUANTITY FROM 100--20 =
ELASTICITY BECAUSE OF DRAMATIC CHANGE IN QUANTITY 20/30 / -80/60 = -1.33/0.67 = -2 ELASTIC DEMAND = VERY PRICE SENSITIVE CUSTOMER, INCREASING PRICE RESULTS IN LOST IN ALOT FO QUANTITY - REVENUE FELL FROM 2000 (20)(100) - 800 (40)(20)
TYPE OF ELASTICITY?
ELASTICITY OF DEMAND INCOME ELASTICITY CROSS-ELASTICITY SUPPLY ELASTICITY
WHEN OR WHERE IS THE SHUT-DOWN PIINT FO R A FIRM?
EQUAL TO THE MINIMUM OF AVERAVE VARIABLE COSTS - IF PRICE FALLS BELOW THERE IS NOT POINT OF CONTINUING OPERATION. EX: VARIABLE COST OF AIRLINE, FUEL & LABOR FIXED = COST OF AIRPLANE, MAY BE CONTINUED TO FLY IF THEY ARE COVERING FUEL AND LABOR, BUT MAY NOT COMPLETLY COVER COSTS OF FIXED/SOME OF THE COST OF AIRPLANE - BANCRUPCY.
DECREASE IN SUPPLY
EQUILIBIUM PRICE TO RISE AND QUANTITY TO FALL
DECREASE IN DEMAND
EQUILIBRIUM PRICE AND QUANTITY FALL
RESULTS IN CHANGE IF: INCREASE IN DEMAND =
EQUILIBRIUM PRICE AND QUANTITY RISE
INCREASE IN SUPPLY
EQUILIBRIUM PRICE TO FALL AND QUANTITY TO RISE
WHAT IS ECONOMIC VALUE ADDED (EVA)?
EVA = (RETURN ON TOTAL CAPITAL - COST OF CAPITAL) X TOTAL CAPITAL RETURN ON CAPITAL = PROFIT/CAPITAL
EXAMPLE OF ARC ELASTICITY EQUATION? GIVEN: PRICE OF PRODUCT INCREASED FROM $11-$12 QUANTITY DEMANDED DECREASED FROM 14-12
Ep = numerator = (12-14)/(14+12/2) = -2/13 denominator = 12-11/(11+12/2) = 1/11.5 to turn the devision into a multiply reverse the numerator and denominator on the 2nd equation = (-2/13)(11.5/1) = -1.77 (rounded to the nearest 3rd digit
EQUATION FOR POINT ELASTICITY =
Ep = (CHANGE IN QUANTITY/CHANGE IN PRICE) X PRICE 1/QUANTITY 1
PERFECT ELASTICITY EQUATION?
Ep = (INFINITY SYMBOL) (IN ABSOLUTE TERMS) ONE POSSIBLE PRICE & AT THAT PRICE AN UNLIMITED QUANTITY CAN BE SOLD. RESULTS IN HORIZONTAL LINE (PERFECT COMPETITION)
UNITARY ELASTICITY OF DEMAND EQUATION?
Ep = 1 ( IN ABSOLUTE TERMS) 1% CHANGE IN PRICE RESULTS IN A 1% CHANGE IN QUANTITY IN THE OPPSOSITE DIRECTION
PERFECT INELASTICITY EQUATION =
Ep = O QUANTITY DEMANDED REMAINS THAT SAME REGARDLESS OF PRICE EX: PRICE OF SALT. TODAYS PRICE OF SALT IS 44 CENTS, IT IS LIKELY THAT A SIGNIFICANT INCREASE TO 55 CENTS OR SIGNFICANT DECREASE TO 34 CENTS WOULD RESULT IN ANY CHANGE/CONSUMTION OF SALT WOULD NOT CHANGE DEPENDANT UPON PRICE EXAMPLE: FEE FOR DRIVERS LICENSE - WE MUST PAY REGARDLESS OF DECREASE/INCREASE OF PRICE. CHANGE IN PRICE WILL NOT CHANGE THE CHANGE IN QUANTITY WE PURCHASE. DUE TO RENEW = 1
EQUATION OF RELATIVE ELASTICITY OF DEMAND?
Ep > 1 (IN ABSOLUTE TERMS) 1% CHANGE IN PRICE CAUSES A CHANGE IN QUANITYT DEMANDED GREATER THAN 1% EX: COEFFICIENT 1.77 IS A CASE OF ELASTIC DEMAND
WHAT IS THE EQUATION FOR ARC ELASTICITY?
Ep=(Q2-Q1)/(Q1+Q2/2) / (P2-P1)/(P1+P2/2) NUMERATOR = % CHANGE IN QUANTITY DEMANDED DENOMINATOR = PERCENTAGE CHANGE IN PRICE Ep = Arc price elasticity Q1=Original quantity demanded Q2=New quantity demand P1=Original price P2= New price
EQUATION FOR INCOME ELASTICITY?
Ey = % CHANGE IN QUANTITY / % CHANGE IN Y Y = INCOME
SHORTAGE EX: COMMON RESULT AT A POPULAR GAME WHERE QUANTITY DEMAND EXCEEDING QUANTITY SUPPLIES AT THE?
FACE VALUE OF THE TICKETS
IF MC < AVC, THEN AVC IS?
FALLING **ONLY OCCURS WHEN MP(L) > AP(L), THEN AP(L) IS RISING
REGARDLESS OF HOW STRONG THE MARKET POWER OF A FIRM, IT WOULD BE EXTREMELY DIFFICULT FOR IT TO RAISE PROCES IN THE FACE OF?
FALLING OR SLUGGISH MARKET DEMAND
VARIATION IN RETURN THAT IS INDUCED BY LEVERAGE (PROPORTION OF A COMPANY FINANCED BY DEBT)
FINANCIAL RISK
WHEN LOOKING AT GRAPHICAL REPRESENTATION 1ST
FIND DEMAND LINE FIRST (P110)
PERFECT COMPETITION =
FIRM HAS NO POWER LONG-TERM ENTRY AND EXIT WILL ADJUST AND FIRM AS VERY LITTLE
IMPERFECT COMPETITION?
FIRM HAS SOME POWER., BUT NOT AS STRONG AS THE MENOPOLY POWER
NON-PRICE LEADER IS?
FIRM THAT LEADS THE DIFFERENTIATION OF PRODUCTS ON OTHER NON-PRICE ATTRIBUTES (THINK IPHONE)
IF ECONOMIC PROFIT BECOMES EVIDENT DUE TO SUCCESSFUL FIRM, THE ENTRY OF OTHER FIRMS TRYING TO TAP INTO THAT PROFIT WILL RESULT IN?
FIRMS DEMAND CURVE WILL SHIFT TO THE LEFT, PROFIT REDUCTION TO THE ORIGINAL FIRM. ADUSTMENTS MUST BE MADE TO COMBAT NEW COMETING FIRMS LONG-RUN = FIRM WILL ONLY EARN NORMAL OR "ZERO" ECONOMIC PROFIT INSTEAD OF THE POSTIIVE PROFIT INTIALLY OBTAIN IN SHORT-TERM
LONG RUN PRODUCTION FUNCTION ARE EXPECTED TO?
FIRS EXHIBIT INCREASING RETURNS, THEN CONSTANT RETURNS, AND FINALLY DECREASING RETURNS TO SCALE
TOTAL COST =
FIXED COST+VARIABLE COST
IF MC = AVC THEN AVC IS?
FLAT ** ONLY OCCURS WHEN MP(L) - AP(L), THEN AP(L) IS FLAT (AND AT ITS MAXIMUM)
3RD THING TO LOOK FOR?
FROM THE MAGINAL COST/OUTPUT LEVEL DO YOU GO DOWN TO AVERAGE COST (GOOD THING FOR THE FIRM = ECONOMIC PROFIT) OR DO YOU GO UP TO AVERAGE COST? (BAD FOR FIRM)
THE SMALLEST OUTPUT WHERE MINIMUM LRAC IS ACHIEVED IS CALLED?
MINIMUM EFFICIENT SCALE (MES OR MinES)
EXAMPLES OF MENOPOLOES?
GAS AND ELECTRIC COMPANIES PRIOR TO 1984 - AT&T WAS TELECOM MENOPOLY
DIFFERENTIATING APPROACH
GENERIC STRATEGY TO REMOVE RIVALVRY OR WEAKEN THE 5 FORCES PATENT, COPYRIGHT - REDUCE THREAT OF NEW ENTRANCES
WHAT IS BRIC'S?
GOLDMAN SAC'S CHAIR CALCULATED HOW THE FOLLOWING COUNTRIES MAKE-UP OVER 40% OF THE WORLDS POPULATION AS WELL AS THEIR RAPID ECONOMIC GROWTH... B - BRAZIL R - RUSSIA I - INDIA *** (3X'S HIGHER GDP RATES) C - CHINA *** (3X'S HIGHER GDP RATES) GDP FOR THE BRIC'S COUNTRIES ARE USUALLY TWICE MORE THAN THE US - MAKING THEM HIGHLY MARKETABLE LOCATIONS TO START/COMPANIES SEEKING NEW MARKETS IN WHICH TO GROW
WHAT IS INDIRECT COMMAND?
GOV MAY USE THE MATERIAL INCENTIVES OF THE MARKET PROCESS TO ALLOCATE RESOURCES IN CERTAIN WAYS EX: GOV MAY OFFER CONTRACTS FOR PRIVATE COMPANIES TO PRODUCE MILITARY GOODS AND SERVICES
BAD WEATHER MAY AFFECT WINE, BUT DRIVES UP THE COST OF
GRAPES
NUMBER OF SELLERS =
GREATER COMPETITION - SUPPLY CURVE WILL MOVE TO THE RIGHT
INCREASE IN POPULATION =
GREATER DEMAND SHIFT TO THE RIGHT
IF THE SUPPLY CURVE IS "MORE ELASTIC", THE EFFECT OF A CHANGE IN DEMAND WILL BE...?
GREATER ON QUANTITY THAT ON THE PRICE OF THE PRODUCT
AS MORE UNITS OF X ARE ADDED TO THE PRODUCTION PROCESS, MP IS?
GREATER THAN AP AND IT THEN BECOMES LESS THAN AP
EXAMPLES OF MACROECONOMICS?
GROSS DOMESTIC PRODUCT (GDP) UNEMPLOYMENT INFLATION TRADE (NATIONAL AND INTERNATIONAL)
MUTUAL INTEDEPENDANCE IN AN OLIGOPLY SETTING?
HAVING A FEW SELLERS WATCHING EACH OTHER SELLING PRICESS - CAN LEAD TO "KINKED" DEMAND CURVE. FOR PRICE DROP, OTHER FIRMS WILL DROP TO, BUT IF FIRM INCREASES PRICES TO P3, THE OTHER FIRMS DO NOT INCREASE, RESULTING IN NET LOSS FROM THE INITIAL MARKET SHIFT. *** COMPETITORS WILL NOT FOLLOW PRICE INCREASE, BUT WILL FOLLOW PRICE DECREASE
IT IS EXTREMELY DIFFICULT FOR A COMPANY TO MAEK MONEY IN A?
HIGHLY COMPETITIVE MARKET IT REQUIRES FIRMS TO OPERATE AT EXTREMELY HIGH LEVELE OF EFFICIENCY
MORAL HAZARD PROBLEM?
HIRED A GOOD WORKER BUT HE GOOFS OFF ON THE INTERENET ON FRIDAYS ***AGENT***
PRINCIPLE AGENT PROBLEM EXAMPLE ASYMMETRIC PROBLEM EXAMPLE?
HIRED THE WRONG WORKER ***AGENT***
STRATEGY IS?
HOW AN ORGANIZATION IS GOING TO USE RESOURCES TO ACHIEVE SUPERIOR PERFORMANCE OVER THE LONG RUN.
BASIC BUSINESS DECISION
HOW MUCH SHOULD WE PRODUCE? HOW MUCH SHOULD WE CHARGE? HOW MUCH PROFIT WILL WE EARN? IF A LOSS IS INCURRED, WILL IT BE WORTHWHILE TO CONTINUE IN THE MARKET LONG-RUN OR SHOULD WE EXIT?
IF AVERAGE COST IS GREATER THAN MARGINAL COST/PROFIT, WHAT WOULD INDICATE TO STAY IN PRODUCTION?
IF AVERAGE VARIABLE COST IS STILL BELOW THE MARGINAL COST - LOSING MONEY SHORT-TERM, BUT WOULD LOSE MORE/ALL OF THE FIXED COST IF WE WEERE TO SHUT DOWN - COVERING VARIABLE AND ONLY COVERING PART OF THE FIXED COST === CONTRIBUTION MARGIN = CM = TR-TVC ***IF CONTRIBUTION MARGIN > THAN 0 CONTINUE TO PRODUCE IN THE SHORT RU TO PAY SOME OF THE FIXED COST.
MICHAEL PORTER 5 FORCE MODEL INDICATED HOW THE HIGHEST RATE OF RETURN WOULD RESULT?
IF BUYERS AND SUPPLIERS DO NO EXERT MUCH MARKET POWER AND THERE IS LITTLE THREAT FROM EIGHT NEW COMPETITORS OR THE USE OF SUBSTITUE PRODUCTS, FIRMS IN THE INDUSTRY ARE LIKEYL TO EARN RELETIVELY HIGH RETURNS ON THEIR INVESTMENT.
PRICES OF OTHER GOODS OR SERVICES OFFERED BY THE SELLER EXAMPLE?
IF COMPETITOR IS SELLING HOT DOGS AT A HIGHER PRICE THAN PIZZA, THEN THE "PIZZA" PLACE MAY OPT TO START PRODUCING HOT-DOGS FOR CONSUMERS TO TAP INTO THAT PARTICULAR MARKET WHILE THE DEMAND/PROFIT IS HIGHER - ULTIMATLY REDUCING THEYRE INITIAL PRODUCT OF PIZZA MARKET SUPPLY OF PIZZA WILL DECREASE
FUTURE EXPECTATIONS
IF ENOUGH BUYERS EXPECT THE PRICE OF A GOOD OR SERVICE TO RISE (FALL) IN THE FUTURE, IT MAY CAUSE THE CURRENT DEMAND TO INCREASE (DECREASE) RESPECTIVELY. EX: STOCKS, BONDS, CD'S... "BUY LOW, SALE HIGH" INSTRUCTOR CONFUSED ABOUT THIS TERM
FUTURE EXPECTATIONS ECAMPLE? -
IF SELLERS ANTICIPATE A RISE IN PRICE, THEY MAY CHOOSE TO HOLD BACK THE CURRENT SUPPLY TO TAKE ADVANTAGE OF THE HIGHER FUTURE PRICE, THUS DECREASING MARKET SUPPLY **WILL RESULT IN GREATER PROFITS
MR IMPORTANT NOTE?
IF WE PRODUCE ONE MORE UNIT, WE HAVE TO ADJUST OUR PRICE (DOWN) IN ORDER TO SALE THAT ADDITIONAL UNIT THEREFORE MARGINAL REVENUE IS LESS THAN OUR CURRENT PRICE
DIFFERENTIATING APPROACH IS COMPARABLE TO?
IMPERFECT COMPETITIVE MARKETS
MONOPOLISTIC AND OLOGOPOLY ARE CONSIDERED?
IMPERFECT MARKETS OR IMPERFECT COMPETITION "NONPRICE COMPETITION
INELASTIC DEMAND & PRICE INCREASES REVENUE WILL? (TEST QUESTION!!!)
INCREASE IF WE CAN RAISE OUR PRICE, PRODUCE LESS, GENERATE MORE REVENUE, THEN COST SHOULD GO DOWN = BEST ACSE SCANARIOR PRICE INCREASE, SMALL REDUCTION IN QUANTITY, REVENUE GOES UP - COST GOES DOWN
CIONVERSELY, WHEN MARGINAL PRODUCT DECREASES, MARGINAL COSTS WILL?
INCREASE - WILL USUALLY OCCUR WHEN LAW F DIMINISHING RETURN TAKES EFFECT
INCREASE TASTE SHOULD?
INCREASE DEMAND TO THE RIGHT
IF OPERATING COSTS/UNIT COST IS REDUCED TO MAKE A SINGULAR PRODUCT THEN?
INCREASE IN MARKET SUPPLY IE: AUTOMBILE EX: SUDDAN VS CROSS-OVER VEHICLES - IF THERE IS A HIGHER DEMAND FOR SEDANS, THEN CONSTRUCTION WILL INCREASE/SUPPLY WITH INCREASE IN SUDDANS AND LESS OF CROSS-VEHICLES...
IN TERMS OF A SHORTAGE, SELLERS WILL?
INCREASE PRICE AS A RESULT OF MARKET DEMAND INCREASES
EQ > 1 =
INCREASE RETURNS TO SCALE (IRTS)
IF AN INCREASE IN A FIRMS INPUT BY SOME PROPORTION RESULTS IN AN INCREASE IN OUTPUT BY A GREATER PROPORTION, THE FIRMS EXPERIENCES?
INCREASEING RETURNS TO SCALE
WHEREAS THE LONG RUN FUNCTION IS AFFECTED BY?
INCREASING AND DECREASING RETURNS TO SCALE, A PHENOMENON ASSUMED TO TAKE AFFECT WHEN ALL THE FIRMS INPUTS ARE ALLOWED TO VARY.
SHORT RUN FUNCTION IS AFFECTED BY?
INCREASING AND DIMINISHING RETURNS TO INDIVIDUAL FACTORS, WHICH TAKES AFFECT WHEN ONE OF THE INPUTS IS HELD CONSTANT
GOAL OF SCM IS?
INCREASNG PROFITS BY REDUCING COSTS
OPPORTUNITY COSTS ARE CONSIDERED?
INDIRECT COSTS OR IMPLICIT COST
TECHNOLOGY?
INNOVATION INCREASE SUPPLY SHIFT TO THE RIGHT (CONVERSE ALWAYS NEVER HAPPENS)
THINK OF DISCOUNT RATES AS?
INTEREST RATES
*** BUT AS WE INCREASE MORE AND MORE WORKERS, EVENTUALLY THERE ARE SO MANY WORKERS RELATIVE T THE FIXED CAPACITY THAT THEY MAY START TO ...?
INTERFERE WITH EACH OTHER ACITVITIES. IN THIS CASE, IT LEADS TO NEGATIVE MARGINAL RETURNS CAUSING THE TOTAL PRODUCT TO DECREASE IE: "TOO MANY COOKS SPOILED THE SOUP"
TRADITIONAL PROCESS IS SEEN MORE IN WHAT TYPES OF MARKET?
INTERNATIONAL EX: EATING HABITS, RELIGIOUS BELIEFS THAT RESTRICT USE OF BEEF OR PORK, POLITICAL FACTORS...
WHAT IS THE EQUILIBRIUM PRICE?
INTERSECTING EQUALITY BETWEEN SELLING AND PURCHASING OF A PRODUCT/SERVICE. EX: AT $4 - EQUILIBRIUM PRICE AT 300 PIZZA'S = EQUILIBIRUM QUANTITY
WHAT IS THE COBB-DOUGLAS PRODUCTION FUNCTION?
INTRIDUCED IN 1928 ESTIMATES BOTH INDIVIDUAL FIRM AND AGGREGATE PRODUCTION FUNCTIONS. EXCELLANT APPROXIMATION. TWO INPUTS USED WERE NUMBER OF MANUAL WORKERS (L) AND FIXED CAPITAL (K).
PRODUCTIVITY AND COST ARE?
INVERSELY RELATED
EXAMPLE OF EQUATION NOT TESTABLE: SCENARI 2 (BAD/LOSS)
INVEST: $1000 OPERATING PROFIT: $60 COST OF CAPITOL = 7% EVA (6%-7%)1000 = -10 (LOSS OF $10)
EXAMPLE: OPPORTUNITY COSTS IS THE 1,000,000 OF INVENTORY/ASSET THE COMPANY HAS. WHAT IS NOT RELEVANT COSTS? OUT OF POCKET COSTS?
IS THE ORIGINAL COST OF 750,000 BECASUE IT IS NOT THE OPPORTUNITY COST OF GOING AHEAD WITH THE PROJECT OUT OF POCKET COSTS WOULD BE ANY ADDITIONAL COST THE COMPANIES PLANS TO PAY FOR ADDITIONAL CHIPS TO PURCHASE. EX: IF COMPANY DECIDES IT NEEDS A TOTAL OF 1,500,000 WORTH OF CHIPS TOTAL (AT CURRENT MARKET PRICE) WHAT IS THE OPPORTUNITY COST AND WHAT IS THE OUT OF POCKET COSTS? OPPORTUNITY = 1,000,000 ALREADY IN POSSESSION OUT OF POCKET = DIFFERENCE NEEDED TO PURCHASE IN ADDITION TO WHAT IS ALREADY IN INVENTORY
TO SOLVE FOR THE MARGINAL REVENUE?
IT IS THE DIFFERENCE BETWEEN THE LAST REVENUE AND THE NEW REVENUE SO SUBTRACT FROM PREVIOUS REVENUE TO THE NEW REVENUE = MARGINAL REVENUE OR DIFFERENCE IN REVENUE.
WHAT IS THE MR = MC RULE?
IT IS WHEN MARGINAL REVENUE EXCEEDS OR EQUALS MARGINAL COST, PRODUCTION OF THE SAID UNIT WOULD COST MORE TO PRODUCE THEN WHEN IS EARNED IN REVENUE. A COMPANY THAT WANST TO MAXIMIZE ITS PROFITS, AND REDUCE ITS LOSS, SHOULD PRODUCE A LEVEL OF OUTPUT AT WHICH THE ADDTIONAL REVENUE RECIEVED FROM THE LAST UNIT IS EQUAL TO THE ADDITOANAL COST OF PRODUCING THAT UNIT
WHAT IS DERIVED DEMAND?
ITEMS THAT FO INTO THE PRODUCTION OF A FINAL COMMODITY, SUCH AS MATERIALS, MACHINERY, AND LABOR. "FINAL PRODUCT" EX: CONSIDER BOSSES DEMAND FOR LABOR. ALONG WITH MATERIALS NEEDED TO PROVIDE THOSE SERVICES
IF A COMPANY SETS ITS PRICE TOO LOW...?
ITS MARGINAL COST WILL EXCEED ITS MARGINAL REVENUE, AND THE FIRM WILL EXPERIENCE A MERGINAL LOSS
IF A FIRM SETS A PRICE TOO HIGH, THEN
ITS MARGINAL REVENUE WILL EXCEED ITS MARGINAL COST, FORGOING SOME AMOUNT OF THE MARGINAL PROFIT
A FIRM OPERATING IN AN OLIGOPOLY DERIVES?
ITS MARKET POWER FROM ITS ABILITY TO DIFFERENTIATE ITS PRODUCT, ITS RELATIVE LARGE SIZE, OR BOTH.
short-run production function is?
MAXIMUM QUANITTY OF A GOOD OR SERVICE THAT CAN BE PRODUCED BY A SET OF INPUTS, ASSUMING THE AMOUNT OF AT LEAST ONE OF THE INPUTS REMAINS CONSTANT EX: HOLD CONSTANT USUALLY CAPITAL, SIZE OF BUILDING, # OF AIRPLANES - HELD CONSTANT...
MARGINAL COST EQUATION?
MC = CHANGE IN TVC/CHANGE IN Q = W/MP W = COST OF INPUTS
BREAKING EVEN FROM THE ECONMICAL SENCE
JUST ENOUGH TO PAY FOR SALARY, "0" PROFIT IS CALLED "NORMAL-PROFIT"
SHORT TERM IS DEFINED BY "VARIABLE INPUTS", WHICH ARE?
LABOR HOURS AND RAW MATERIALS. IT IS THE PERIOD IN TIME WHICH BUYERS ALREADY IN THE MARKET RESPOND TO CHANGES IN EQUILIBRIUM PRICE BY ADJUSTING THE QUANTITY DEMANDED FOR A PARTICULAR GOOD/SERVICE.
MENOPOLISTIC COMPETITION (HYBRID)
LARGE # OF SMALL FIRMS ACTING INDIPENDANTLY DIFFERENTIATED PRODUCE MARKET ENTRY & EXIT NON-PRICE COMPETITION VERY IMPORTANT **** EX: PENSACOLA RETAILERS, RESTUARANTS AND OTHER DETAILS
PERFECT COMPETITION (THINK OF AS EXTREMES) 4 CHARACTERISTICS
LARGE NUMBER OF SMALL BUYERS AND SELLERS STANDARDIZED PRODUCT VERY EASY TO ENTRY AND EXIT MARKET NON-PRICE COMPETITION NOT POSSIBLE FIRM IS VEIWED AS A "PRICE TAKER" - THERE WILL BE DISTCNTIONS BETWEEN SHORT-RUN & LONG-RUN. GOAL IS TO MAXIMIZE PROFIT - ENTERPREUNER MUST BE CONSIDERED AS AN OPPORTUNISTIC COST. FLAT DEMAND CURVE W/ PRICE BEING FIXED OVER SHORT-RUN - IE PERFECTLY ELASTIC DEMAND CURVE. (EX RECYCLE PRICE IS FIXED PER PRICE) EX: AGRICULTURAL PRODUCTS (CORN FARMERS), FINANCIAL INSTRUMENT, COMMODITIES
PRICE LEADERS MAY?
LEADING FIRM WILL LEAD IN CHANGING PRICES, AND ASSUMED OTHER FIRMS WILL FOLLOW A PRICE INCREASE, BUT WILL NOT GO LOWER IN ORDER TO AVOID A PRICE WAR
ECONOMIC LOSS RESULTS IN SUPPLY CURVE SHIFTING TO THE?
LEFT
THE EFFECT IN THE MARKET FOR FRESH PRODUCE WHEN AN E-COLI SCARE IS PUBLICESED?
LESS DEMAND FOR FRESH PRODUCE WILL RESULT IN A LOWER DEMAND AND A DECREASE IN COSTS, AND QUANTITY OF FRESH PRODUCE DOWN.
THE FIRM WILL REMAIN IN BUSINESS IF ITS LOSSES ARE?
LESS THAN ITS FIXED COSTS ***IE: UNDER SALE YOUR PRODUCT EARLY WITH THE EXPECTATION OF RISING LATER TO STAY IN BUSINESS. THE INITIAL DROP IN PRICE WILL INCREASE POPULATRITY TI DEVELOP A DEMAND FOR THAT PRODUCT.
THEREFORE A PLANT IS BETTER OFF OPERATING A LARGER PLANT AT?
LESS THAN MAXIMUM CAPACITY, THEN A SMALLER PLANT AT MAXIMUM CAPACITY
WHAT IS THE LEARNING CURVE?
LINE SHOWING THE RELATIONSHIP BETWEEN LABOR COST AND ADDITIONAL UNITS OF OUTPUTS.
SHORT RUN VS LONG RUN IS BELIEVED TO BE
LONG RUN > ELASTICITY SHORT RUN - LESS ELASTIC
GUIDING FUNCTION OF PRICE IS A?
LONG-RUN PHENOMENON
IF WE INCREASE THE PRICE BY 10% WILL WE?
LOSE 1% QUANTITY, 15% QUANTITY? ELASTICITY WILL DEFINE/REFINE THE AMOUNT OF LOSS DEPENDING ON CHANGE
NON-MONETARY COST - PARKING LOT EXAMPLE?
LOSS OF TIME (OPPOTUNITY COST) SOME LOSS IN GAS MONEY *SATURDAY MORNING CLASS - SACRAFICE SLEEP TIME
THE KEY TO IUNDERSTANDING THE CHANGE IN Q, AP, AND MP IS THE?
LOW OF DIMINISHING RETURNS
DEFINE THE EQUATION FOR CROSS-PRICE ELASTICITY?
MEASURE OF THE PERCENTAGE CHANGE IN QUANTITY DEMANANDED OF PRODUCT A RESULTING FROM A 1 PERCENT CHANGE IN THE PRICE OF PRODUCT B
EQUATION FOR LEARNING CURVE?
MEASURED IN TERMS OF THE PERCENTAGE DECREASE IN ADDITIONAL LABOR COST EACH TIME OUTPUT DOUBLES
WHAT IS PRICE ELASTICITY OF SUPPLY?
MEASURES THE PERCENTAFE CHANGE IN QUANTITY SUPPLIED AS A RESULT OF A 1 PERCENT CHANGE IN PRICE AND/OR A RESPONSIVNESS OF QUANTITIES PRODUCED BY SUPPLIERS TO A CHANGE IN PRICE
CONFLICT OF INTEREST BETWEEN MANAGERS AND STOCKHOLDER?
MANAGERS ARE MORE INTERESTED IN THEIR JOB VS THE CORPORATIONS PERFORMANCE OR SHAREHOLDER PROFITS. MANAGERS HAVE MORE CONTROL OVER DAILY OPERATIONS, BUT PRIMARY GOAL IS PERSONAL MONETARY GAIN - PERKS, BONUSES - NOT NECESSARILY SHAREHOLDERS OR EMPLOYEE'S SHAREHOLDER - LESS CONTROL ONLY HAVE OWNERSHIP OF SMALL PORTION OF FIRM. MORE INTERESTED IN PORTFOLIO NOT EACH INDIVIDUAL FIRM. DETERMINED BY COST/BENEFIT ANALYSIS.
NONPRICE VARIABLES ARE FACTORS THAT?
MANAGERS CAN CONTROL, INFLUENCE, OR EXPLICITLY CONSIDER IN MAKING DECISION AFFECTING THE DEMADN FOR THEIR GOOD AND SERVICES
EXAMPLES OF MONOPOLISTIC COMPETITIONS?
MANY FIRMS/RETAILERS - EASY ENTRY, DIFFERENTIATION (RETAILERS DONT CARRY SAME FOOD ITEM, OR CLOTHING ITMES IS IT IS A CLOTHING RETAILER)
INSTEAD OG REFFERING TO TOTAL COST AS "INCREASING AT AN INCREASING" RATE? WE CAN SAY?
MARGINAL COST IS INCREASING
THEREFORE, WHEN MARGINAL PRODUCT INCREASES, WHAT HAPPENS TO THE MARGINAL COSTS?
MARGINAL COST OF PRODUCTION ALSO DECREASES
DEMINISHING REVERSE OF PRODUCTION WHAT HAPPENS TO MARGINAL COST?
MARGINAL COST WILL INCREASE. IE: RESTURANT THAT RUNS OUT OF EGGS, AND SENDS EMPLOYEE TO BUY EGGS. EXPECT AN INCREASE COST OF EGGS AT THE MARKET VERSUS OLD EGG OBTAINMENT, PLUS INCLUDE THE COST IT TOOK THE EMPLOYEE TO GO GET THOSE EGSS
IN THE SHORT-RUN PRODUCTION FUNCTION TWO OTHER TERMS BESIDES QUNAITY OF OUTPUT ARE?
MARGINAL PRODUCT (MP) - CHANGE IN OUTPUT OR TOTAL PRODUCT RESULTING FROM A UNIT CHANGE IN A VARIABLE INPUT. AS WE ADD MORE INPUT, HOW MUCH OUTPUT WILL WE GET AVERAGE PRODUCT (AP) - TOTAL PRODUCT PER UNIT OF INPUT USED. TAKE TOTAL OUTPUT DIVIDE IT BY THE TOTAL USE OF INPUT = AVERAGE PRODUCT.
THE PROFIT-MAXIMIZING FIRMS OPTIMAL LABOR OCCURS WHERE THE?
MARGINAL REVENUE PRODUCT OF LABOR EQUALS MARGINAL LABOR COST - MRP = MLC
EXAMPLE OF OLIGOPOLY
MARINA IN PENSOCOLA - ACCORDING TO OWNER, THE MARINA IN FLORIDA IS DIFFICULT TO GET AN ENVIRONEMENTAL PERMIT - MAKING IT A BARRIER TO ENTER THE MARKET
DISECONOMY OF SCALE?
MARKET HAS PUSHED US BEYOND WHAT WE CAN EFFECTIVLY MANAGE SCALE IS NOT EFFECTIVE RISING INVENTORY, TRANSPORTATION COSTS...
IMPERFECT MARKET =
MARKET IN WHICH FIRMS ARE ABLE TO EXERT VARYING DEGREES OF MARKET POWER BECAUSE OF THEIR SIZE AND/OR THEIR ABILITY TO DIFFERENTIATE THEIR PRODUCTS FROM THOSE SOLD BY THEIR COMPETITORS DIFFICULT TO MAKE MONEY
WHAT IS MENOPOLISTIC COMPETITION?
MARKET IN WHICH THERE ARE MANY FIRMS AND RELITIVELY EASY ENTYR. SIMILIAR CHARACTERISTICS OF THOSE IN A PERFECT MARKET. THIS MARKET SOMEHOW CONVINCES THEIR CUSTOMERS THAT WHAT THEY ARE SELLING IS NOT THE SAME AS THE OFFERING OF OTHER FIRMS IN THE MARKET, THIS FIRM IS CAPABLE OF SETTING THERE PRICE HIGHER THAN THE PRICE ESTABLISHED BY THE FORCES OF SUPPLY AND DEMAND. NAME BRAND IDIOLOGY
CONTROL OF MARKET PRICE IS CALLED?
MARKET POWER EVIDENT IN "PERFECT COMPETITION" MARKETS AKA "PRICE TAKERS"
MENOPOLIST HAS?
MARKET POWER AND CAN SET MARGINAL REVENUE = TO MARGINAL COST TO MAXIMIZE PROFIT BUT THE MENOPOLIST HAS TO WORRY ABOUT CHANIGN MARKET CONDITIONS TO PREVENT BECOMING THE NEXT "POLOROID"
WHAT IS THE SHUT DOWN POINT?
MARKET PRICE IS AT A LEVEL IN WHICH A FIRM FOLLOWING THE MR = MC RULE WOULD LOSE AN AMOUNT JUST EQUAL TO ITS FIXED COST OF PRODUCTION ***WOULD ALSO RESULT IN A ZERO CONTRIBUTION MARGIN
WHICH OF THE ABOVE PROCESSES IS MORE PROMINENT IN THE US?
MARKET PROCESS ***BUT COMMAND PLAYS AN IMPORTANT ROLE *** US CONSIDERED "MIXED" ECONOMY
SHORTAGE?
MARKET SITUATION IN WHICH THE QUANTITY DEMANDED, AT A PRICE BELOW THE EQUILIBRIUM
WHAT IS THE TOTAL REVENUE PRODUCT? "TRP" =
MARKET VALUE OF THE FIRM OUTPUT, COMPUTED BY MULTIPLYING THE TOTAL PRODUCT BY THE MARKET PRICE (Q x P)
SURPLUS?
MARLET SITUATION IN WHICH THE QUANTITY SUPPLIED ECEEDS THE QUANTITY DEMANDED, AT A PRICE ABOVE THE EQUILIBRIUM LEVEL
HEALTH INSURANCE COMPANY WHERE HEALTHCARE CONSUMER CONSUMES "ZERO" DEDUCTIBLE? WOULD BE A?
MORAL HAZARD (HAVING INSURANCE WOULD LEAD SOME PEOPLE TO UTILIZE HEALTHCARE SERVICES MORE THAN NECESSARY)
RELATED PROBLEM IS?
MORAL HAZARD - POST CONTRACT HAZARD IE: RENTAL CAR AND WAS DRIVEN MUCH HARSHER THAN IF YOU OWNED THE CAR
A LONG RUN DEMAND CURVE WILL GENERALLY BE?
MORE ELASTIC THAN A SHORT0RUN CURVE SHORT RUN DEFINED BY AS - AMOUNT OF TIME THAT DOES NOT PERMIT A FULL ADJUSTMENT BY CONSUMERS TO A PRICE CHANGE
THE HIGHER THE COEFFICIENT, THE ?
MORE QUANTITY SUPPLIED WILL CHANGE (IN [ERCENTAGE TERMS) IN RESPONCE TO THE CHANGE IN PRICE
MATHEMATICAL REFINEMENT MAY NOT BE THE?
MOST ESSENTIAL THING
THE GUIDING OR ALLOCATING FUNCTION OF PRICE IS THE
MOVEMENT OF RESURCES INTO OR OUT OF MARKETS IN RESPONCE TO A CHANCE IN THE EQUILIRIUM PRICE F A GOOD OR SERVICE. EX: HIGHER GASA PRICES MAY FORCE MARKET TO BUY LESS TRUCKS & AN INCREASE IN MORE FUEL EFFICIENT VEHICLE WOULD RISE & MARKET WILL TRY TO INCREASE THE SUPPLY OF THAT PRODUCT.
MULTIPLE VARIABLE INPUTS =
MP1/w1 = MP2/w2 = MPK/wk
ARC MARGINAL REVENUE EQUATION =
MR = CHANGE INTOTAL REVENUE/CHANGE IN QUANTITY
TO SOLVE FOR REVENUE SIMPLY..?
MULTIPLY THE PRICE AND THE QUANTITY
THE COST OF USING VARIABLE INPUTS IS DETERMINED BY?>
MULTIPLYING THE NUMBER OF UNITS BY THE UNIT PRICE
IF MANAGERS IMPROVE EVA - IT RESULTS IN WHAT IN THE MVA?
MVA WILL LIKELY IMPROVE AS WELL
TRANSACTION COST MAYBE LOWER IF THE PRODUCT IS SOLD AS?
NAME BRAND PRODUCT IE: LESS MONEY TOWARDS MARKETING STRATEGIES BECAUSE IT IS A TRUSTED NAME BRAND
WHAT DETERMINES ELASTICITY? RULE OF THUMB?
NECESSITIES = < ELASTICITY (OR INELASTIC) VS LUXURY ITEMS: > ELASTICITY
WHAT IS MANAGEMENT USED FOR WITHIN A FIRM?
NEEDED TO CATAPULT THE IDEAS OF THE ENTERPRENUR OR THE PROFITS OF SHAREHOLDERS? STEVE JOB IS THE EXEMPTION TO HAVING A ENTREPRENEUR AND A MANAGER IN ONE. MOST ARE SEPARATE AND MOST HAVE CONFLICTS OF INTEREST
BECAUSE DEMAND CURVE SLOPE DOWNWARD TO THE RIGHT, THE SIGN OF PRICE ELASTICITY IS?
NEGATIVE
THE COEFFICIENT SIGN FOR CROSS ELASTICITY OF COMPLIMENTS IS?
NEGATIVE EX: DECREASE IN HENRYS SOFT DRINKS PRICES IS LIKELY TO INCREASE HIS SNACK FOOD SALES
THE TOTAL FIXED COST COMPONENT OF THE TOTAL COST ...?
NEVER CHANGES AS OUTPUT INCREASES.
IN THE LONG-RUN, ALL INPUTS TO FIRMS PRODUCTION MAY BE CHANGES BECAUSE THERE ARE NO?
NO FIXED COSTS THEREFORE ALL COSTS OF PRODUCTION ARE VARIABLE IN THE LONG RUN
FACTORS THAT CAN CAUSE DEMAND TO CAHNGE ARE CALLED?
NON-PRICE DETERMINANTS OF DEMAND
EXAMPLES OF MENOPOLIES?
NOT EASY TO FIND... GOVERNMENT SANCTIONED AND REGULATED FIRMS. PHATMACEUITCALS, MICROSOFT, A LAS GAS STATION AT THE END OF THE MOJAVE
ECONOMIC COSTS INCLUDE?
NOT ONLY HISTORICAL COSTS AND EXPLICIT COSTS RECORDED BY THE ACCOUNTANT, BUT ALSO THE REPLACEMENT COSTS AND IMPLICIT COSTS (NORMAL PROFITS) THAT MUST BE EARNED ON THE OWNERS RESOURCES.
WHEN SUPPLY CURVE IS MORE "ELASTIC" THE EFFECT?
OF A CHANGE CHANGE IN DEMAND WILL BE GREATER ON QUANTITY THAN ON PRICE OF THE PRODUCT
MENOPOLY (THINK OF AS EXTREMES)
ONE FIRM DOMINATES UNIQUE PRODUCT OR NOTHING SIMILIAR LARGE BARRIER TO ENTRY AND EXIT NON-PRICE COMPETITION NOT NECESSARY CANT CHOOSE PRICE AND QUANTITY (CAN ONLY CHOOSE ONE AT A TIME) EX: NHA BASEBALL NOT A BUSINESS, LABOR LAW EXEMPTION, PHARMCEUTICALS, REGULATED UTILITIES, (GOLF POWER - BUT HEAVILY REGULATED), GAS STATION AT THE EDGE OF THE DESSERT.
OPPORTUNITY COST IS?
ONE OF THE MOST IMPORTANT AND USFEUL CONCEPTS IN ECONOMIC ANALYSIS BECAUSE IT HIGHLIGHTS THE CONSEQUENCES OF MAKING CHOICES UNDER CONDITIONS OF SCARCITY. DEFINED AS THE AMOUNT OR SUBJECTIVE VALUE THAT IS FORGONE IN CHOOSING ONE ACTIVITY OVER THE NEXT BEST ALTERNATIVE.
THE DICISION THAT BRINGS THE FIRM CLOSEST TO ITS END GOAL IS CALLED?
OPTIMAL DECISIONS ***EX: INCREASING # OF GEB COURSES OFFERED TO OBTAIN/REACH PROFIT GOALS
DEFINITION OF STRATEGY IS?
ORGNIZATIONS USES ITS SCARES RECOURCES TO RELATE TO THE COMPETITIVE ENVIRONMENT IN A MANNER THAT IS EXPECTED TO ACHIEVE SUPERIOR BUSINESS PERFORMANCE OVER THE LONG RUN
THE PROCESS OF TRANSFERRING VARRIOUS SERVICES FROM DEVELOPED ECONOMIES TO A DEVELOPING COUNTRY IS CALLED?
OUTCOURCING ***OR PUTTING A HEADQUARTERS OFF SHORE/BERMUDA TO SAVE COSTS - MUST CONSIDER ETHICAL CONCERNS/FACTORS MAYBE MIXED: PRODUCTION IN ONE COUNTRY, HEADQUARTERS IN ANOTHER, AND CONSUMER PURCHASES IN THE US. ***MUST FIND A SWEET SPOT TO MAXIMIZE PROFITS.
3 THINGS CAN HAPPEN IN LONG RUN =
OUTPUT CAN MORE THAN DOUBLT = INCREASE RETURN TO SCALE (IRTS) DOUBLE = CONSTANT RETURN TO SCALE (CRTS) LESS THAN DOUBLE = RESULTS IN LESS THAN DOUBLE DECREASE RETURN TO SCALE (DRTS)
marginal cost rises as?
OUTPUT INCREASES (THANKS TO LAW OF DEMINISHING RETURNS) *RESONABLY TO EXPECT THAT EVENTUALLY THE ECTRA COST PER UNIT WILL EXCEED THE SELLING PRICE OF THE PRODUCT
CORPORATE PROFITS RECORDED BY ACCOUNTANTS TEND TO BE?
OVER-STATED
IF INVESTORS EXPECT RISE IN DIVIDENDS, WHAT EQUATION WOULD BE USED?
P = D1/(K-G) P = PRICE D1 = DIVIDEND TO BE PAID DURING UPCOMING YEAR G = ANNUAL CONSTANT GROWTH RATE OF DIVIDEND EXPRESSED AS A PERCENTAGE ***EX: ASSUMING DIVIDENDS WILL GROW AT A STANDARD RATE (IE: 4%), PRICE STOCKS IS TOMORROWS DIVIDENDS DIVIDED BY DISCOUNT RATE MINUS THE GROWTH RATE
UNDER THE PRICE TAKER RULE, WHEN A COMPANY HAS THE POWER TO SET A PRICE - THE RULE BECOME?
P = MC RULE
EQUATION FOR INVERSE DEMAND CURVE?
P = a - bQ
INELASTIC BAD?
P DECREASES > REVENUE DECREASES (BAD)
INELASTIC EXAMPLE (TEST QUESTION) =
P INCREASE > REVENUE INCREASES (GOOD)
EQUATION TO SOLVE "DIVIDENDS REPRESENTING THE RETURNS ON THE STOCK GENERATED BY THE CORPORATION" IS?
P(PRICE) = D1/1+K+D2/1+K^2+D3/1+K^3.... P= PRESENT PRICE OF STOCK D= DIVIDENDS RECEIVED PER YEAR (1ST YR, 2ND YR...) K= DISCOUNT RATE APPLIED BY FINANCIAL COMMUNITY, AKA COST OF EQUITY CAPITAL OF A COMPANY
EXAMPLE OF ABOVE EQUATION: COMPANY EXPECTS TO PAY OUT DIVIDENDS OF $4 WITH EXPECTED GROWTH TO BE 5% EACH YEAR. RATE OF STOCKHOLDERS DISCOUNT THEIR CASH-FLOWS AT 12% WITH 1 MILLION SHARES OUTSTANDING =
P=4/(0.12-0.05) = 4/.07 = 57.14 (MILLION) "VALUE OF COMPANIES STOCK"
IF IT IS ASSUMED THAT THE COMPANY IS STABLE & DIVIDENDS WILL REMAIN YEAR AFTER YEAR - THE FORMULA THAT IS USED = ?
P=D/K *** PRICE (P) = DIVIDEND PER YEAR (D) DIVIDED BY DISCOUNT RATE (K)
LIST REASONS FOR DISECNOMOMIES OF SCALE?
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LISTING REASONS FOR EXONOMMIESOF SCALE?
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EQUATION: ELASTICITY =
PERCENTAGE CHANGE IN A/PERCENTAGE CHANGE IN B THE RESULT OF THE CHANGE = ELASTICITY
LONG TERM CAN BE DEFINED BY "FIXED FACTORS" WHICH ARE?
PERIOD OF TIME IN WHICH NEW SELLERS MAY ENTER A MARKET OR THE ORIGINAL SELLER MAY EXIT THE MARKET. EXAMPLES OF FIXED FACTORS INLCUDE PROPERTY, PLANT, EQUIPMENT AND LONG-TERM ADJUSTMENT BY SELLERS CAN BE SEEN GRAPHICALLY ON A SHIT IN SUPPLY CURVES.
DEFINE TASTE AND PREFERENCES?
PERSONAL LIKE/DISLIKES OF A CONSUMER (ENHANCED BY ADVERTISING/MARKETING, PROMOTIONS, GOV REPORTS...
GREEK LETTER E IS USED WHEN REFFERING TO ?
POINT ELASTICITY
TO FIND MXIMUM REVENUE ON GRAPH GO TO?
POINT WHERE MR - 0
MARGINAL REVENUE (MR) IS?
POSITIVE AND QUANTITIES WHERE DEMAND IS ELASTIC AND BECOMES NEGATIVE WHEN THE DEMAND CURVE BECOMES INELASTIC
A SIGN OF CROSS ELASTICITY FOR A SUBSTITUTE RESULTS IN A?
POSITIVE COEFFICIENT #
THE ARC COEFFICIENT OF A SUPPLY ELASTICITY IS A?
POSITIVE NUMBER: QUANTITY AND PRICE MOVE IN THE SAME DIRECTION
POSITIVE & NEGATIVE OF BEING AN ENTREPRENEUR?
POSITIVE: FREEDOM NEGATIVE: RISK
EXAMPLES OF INFERIOR GOODS?
POTATOES PORK & BEANS ANNED LUNCHEON MEAT
TOTAL REVENUE EQUATION?
PQ = aQ - bQ^2
ADVERSE SELECTION IS A?
PRE-CONTRACT PROBLEM (OWNER OF THE CARE KNOWS HYSTORY & THE BUYER DOES NOT
THE MEASUREMENT OF SENSITIVITY IN THE PERCENTAGE TERMS IS CALLED THE? or the percentage change in a variable relative to a percentage change in another
PRICE ELASTICITY OF DEMAND EX: LOWERING SOFT DRINK PRICES TO COMETE WITH **DEALING WITH THE SENSITIVITY IF QUANTITIES BOUGHT TO A CHANGE IN THE PRODUCERS PRICE - A CHANGE OR TACTIC CONTROLED BY THE PRODUCER OR DEALER
TOTAL EQUATION FOR PRICE ELASTICITY OF DEMAND?
PRICE ELASTITICY OF DEMAND = (CHANGE IN QUANTITY/QUANTITY) / CHANGE IN PRICE/PRICES = PERCENTAGE CHANGE IN QUANTITY/ PERCENTAGE CHANGE IN PRICE "???"
DIFFERENCE BETWEEN EQUILIBIRUM PRICE VS EQUI. QUANTITY?
PRICE EQUATES THE QUANTITY DEMANDED WITH THE QUANTITY SUPPLIED VS QUANTITY IS THE AMOUNT THAT PEOPLE ARE WILLING TO BUY AND SELLERS ARE WILLING TO OFFER AT THE EQUILIBRIUM PRICE LEVEL
ELASTIC DEMAND - EXAMPLE?
PRICE INCREASE W/ > REVENUE DECREASE VS PRICE DECREASE & > REVENUE INCREASES **WILL DEPEND ON COST EFFECT OF PRODUCT
INCREASE IN PRICE OF RELATED GOODS (COMPLEMENT)
PRICE OF COMPLEMENT FALLS - SHIFT TO THE RIGHT
INCREASE IN RELATED GOODS (COMPLEMENT)
PRICE OF COMPLEMENT RISES SHIFTS TO THE LEFT
INCREASE IN PRICE OF RELATED GOODS (SUBSTITUTE)
PRICE OF SUBSTITUTE RISES - SHIFT IN DEMAND WILL OCCUR TO THE RIGHT
WHEN THE SUPPLY CURVE IS LESS ELASTIC, A CHANGE IN DEMAND WILL HAVE A GREATER EFFECT ON ?
PRICE THAN ON QUANTITY
EQUILIBIRIUM PRICE =
PRICE THAT EQUATES THE QUANTITY DEMANDED WITH THE QUANTITY SUPPLIED IE: PRICE THAT CLEAS THE AMRKET OF A SURPLUS OR SHORTAGE)
ECONOMIES OF SCOPE ARE?
PRODUCING ANOTHER GOOD (BEER BREWERS NOW MAKING APPLE CIDER) REDUCTIONS OF A FIRMS UNIT BY PRODUCING TWO OR MORE GOODS OR SERVICES JOINTLY RATHER THAN SEPERATLY. EX: GLOBAL FOODS EXPANDING INTO SOFT DRINKS - THE ACT OF ENGAGING IN MORE TAHN ONE LINE OF COMPARABLE BUSINESS
monopolisti name is decribed by>?
PRODUCT DIFFERENTIATION ENABLES FIRMS TO EXERCISE SOME MARKET POWER (IE TO ACT AS PRICE MAKERS).
WHY WOULD A FIRM FIND ITSELF WITHIN STAGE I OR STAGE III OF PRODUCTION?
PRODUCTION LEVELSDO NOT DEPEND ON HOW MUCH A COMPANY WANTS TO PRODUCE, BUT ON HOW MUCH ITS CUSTOMERS WANT TO BUY
THE OBJECTIVE TO MAXIMIZE PROFITS IS WHAT HYPOTHESIS?
PROFIT MAXIMIZATION HYPOTHESIS
INCREASE IN CLOUD PRODUCTS - IE WORD WILL RESULT IN?
PURCHASING OF FULL-SCALE MICROSOFT OFFICE
TERMS USED TO DESCRIBE CONSUMPTION OF GOODS RELATED TO INCOME =
SUPERIOR GOOD = LUXURY AUTOMOBILE (RESTAURANT) NORMAL = INCOME ELASTICITY IS POSITIVE (MATURE MARKET)(FOOD) ZERO = DEMAND IS INDEPENDENT OF INCOME INFERIOR GOOD = INCOME ELASTICITY IS NEGATIVE
SUMMARY OF TERMS
SUMMARY OF TERMS:
IN SHORT RUN - A SHORT-RUN ADJUSTMENT BY "SELLER CAN BE ENVISIONED AS A MOVEMENT ALONG A PARTICULAR?
SUPPLU CURVE
THE "POWER FUNCTION" IDENTIFIED AS?
Q = aL^b
THE SLOPE OF DEMAND EQUATION =
Q = b + mP
EQUATION FOR THE PRODUCTION FUNCTION?
Q = f (X1,...Xk) Q = output X1---Xk = inputs used in the production process *** Q IS NOT A MEASURE OF OUTPUT OVER TIME
WHEN PRICE GOES UP THAN
QUALITY DEMAND IS LOWER AT A HIGHER PRICE BUT CONSUMER SURPLUS SHRINKS
MARKET WHERE PRICE ARE GOING UP
QUANITTY IS FALLING & CONSUMER SURPLUS IS SHRINKING
SUPPLY OF A GOOD OR SERVICE IS DEFINED AS?
QUANTITIES OF A GOOD OR SERVICE THAT PEOPLE ARE READY TO SELL AT VARIOUS PRICES WITHIN SOME GIVEN TIME PERIOD, OTHER FACTORS BESIDES PRICE HELD CONSTANT
A CONVEX CURVATURE WOULD RESULT WHEN?
QUANTITIES WOULD BE PURCHASED AT A VERY HIGH PRICE, THE DEMAND CURVE WOULD BECOME ALMOST VERTICAL NEAR THE PRICE AXIS
PRICE DECREASES WILL BRING FORTH SMALLER INCREASES IN ??? & WOULD TAKE WHAT SHAPE?
QUANTITY (CONCAVE)
A CHANGE IN PRICE RESULTS IN A CHANGE IN?
QUANTITY OF THE SUPPLY "MOVEMENT ALONG THE SUPPLY CURVE... OTHER DETERMINANT IS A SHIFT ALONG THE SUPPLY CURVE"
SHORT RUN COST FUNCTION VARIABLES ARE?
QUANTITY OUTPUT (Q) TOTAL FIXED COST - RENT OR LICENCE EXPENSES TOTAL VARIABLE COST - IE LABOR
SUPPLY IS BASED ON AN ASSUMED LENGTH OF TIME WITHIN WHICH PRICE AN THE OTHER FACTORS CAN AFFECT THE?
QUANTITY SUPPLIED
SURPLUS - UNPOPULAR BASEBALL TEAM - ARTIFICIALLY HIGH PRICE MAY RESULT IN?
QUANTITY SUPPLIED IS GREATER THAN QUANTITY DEMANDED UNPOPULAR BASEBALL TICKET - TUES NIGHT RESULTS IN SURPLUS OF TICKETS SELLING BELOW FACE VALUE TOWARDS AN EQUILIBRIUM
DAMAND FOR A GOOD OR SERVICE IS DEFINED AS?
QUATITIES OF A GOOD OR SERVICE THAT PEOPLE ARE READY TO BUY AT VARIOUS PRICES WITHIN SOME GIVEN TIME PERIOD, OTHER FACTORS BESIDES PRICE HELD CONSTANT * HOLDING EVERYTHING CONSTANT: INCOME, PRICE, TASTE/INTEREST
HOW TO CONVERT INTO GRAPH/CURVE USING ALGEBRAIC REPRESENTATION? EX: PIZZA
Qd = 700-100P
INFERIOR GOODS RESULT IN OPPOSITE AFFECT OF INCOME DEMAND -
RARE INSTATNCE IE: ROMAN NOODLES
WHEN THE MARKET PRICE CHANGES TO ELIMINATE THE IMBALANCE B/W QUANTITIES SUPPLIED AND DEMANDED, IT IS CALLED?
RATIONING FUNCTION OF PRICE **TYPICALLY ASSOCIATED WITH SHORTAGES - BUT CAN INCLUDE SURPLUS SITUATIONS
EX OF INPUTS/X'S?
RAW MATERIAL, CARBONATED WATER, SWEETNERS, FLAVORING, LABOR, LINE WORKERS...
WEATHER CONDITIONS? BAD WEATHER (FLOOD, DROUGHTS, SEASONAL CHANGES) RESULTS IN WHAT TO SUPPLY DEMAND?
REDUCED SUPPLY OF AN AGRICULTURAL COMMODITY. ALSO AFFECTS VACATION PRODUCTS AS WELL
MICRO-ECONOMICS DEAL WITH?
SUPPLY & DEMAND INPUT/OUTPUTS PRODUCTION COSTS DISTRIBUTION OF INCOME...
DESCRIVE "THE INVISIBLE HAND"
RELATED TO HAVING TWO COMPARABLE PRODUCTS. IE: PIZZA VS HOT DOGS IF MARKET LEANS TO PURCHASING PIZZA OVER HOT DOGS, THEN HOT DOGS MAY GO OUT OF BUSINESS, RESULTING IN AN INCREASE DEMAND FOR PIZZA, MORE PIZZA SHOPS WOULD OPEN, INCREASE MARKETING FOR FROZEN PIZZA'S IN SURPERSTORES.. WHICH WOULD AFFECT THE SUPPLY AND DEMAND OF THE ORIGINAL SELLER.
WHAT ARE THE CATEGORIES OF ELASTICITY?
RELATIE ELASTICITY OF DEMAND (COMMON) RELATIVE INELASTICITY OF DEMAND (COMMON) UNITARY ELASTICITY OF DEMAND (COMMON) PERFECT ELASTICITY (LIMITING CASE/EXTREME) PERFECT INELASTICITY (LIMITING CASE/EXTREME)
"COMPLETE" DEFINTION OF PRODUCTION FUNCTION?
RELATIONSHIP B/W INPUTS AND MAXIMUM AMOUNT THAT CAN BE PRODUCES WITHIN A GIVEN PERIOD OF TIME WITH A GIVEN LEVEL OF TECHNOLOGY
WHAT IS THE MARKET VALUE ADDED (MVA)?
REPRESENTS THE DIFFERENCE BETWEEN THE MARKET VALUE OF THE COMPANY AND THE CAPITAL THAT INVESTORS HAVE PAID INTO THE COMPANY * A FORWARD-LOOKING MEASURE OR MARKET ASSESSMENT OF THE COMPANY'S FUTURE NET-CASH FLOW
CAPACITY PLANNING IS?
REQUIRES FORCASTING DEMAND ALONG WITH REVENUE GENERATION, MARKETING PRODUCT, AND POROUDCING THE PRODUCT
DURING THE 90'S, THE ONLY WAY TO REDUCE COSTS WERE TO?
RESTRUCTURINFG DOWNSIZING RIGHT-SIZING REDUNDENCY FORCE MANAGEMENT ***REDUCE # OF PEOPLE ON THE PAYROLL
CHANGES IN NONPRICE DETERMINANTS (SUPPLY)
RESULTS IN CHANGES/SHIFTS IN THE SUPPLY
REVENUE EFFECT & ELASTICITY & PRICE INCREASE VIDEO NOTES
REVENUE EFFECT & ELASTICITY & PRICE INCREASE VIDEO NOTES
WITH PRICE DECREASING WHAT RESULTS OCCUR? (3)
REVENUE RISES WHEN DEMAND IS ELASTIC FALLS WHEN IT IS INELASTIC AND REACHES ITS PEAK WHEN ELASTICITY IF DEMAND EQUALS -1
MARGINAL REVENUE IS THE CHANGE IN?
REVENUE WHEN QUANTITY CHANGES ON UNIT
ECONOMIC PROFIT SUPPLY CURVE SHIFTS TO THE?
RIGHT
INCREAASE IN DEMAND RESULT IN A SHIFT TO THE?
RIGHT SIDE OF THE GRAGH DECREASE IN DEMAND SHIFTS TO THE LEFT
IF PRICE DECREASES IN PERCENTAGE TERMS, THAN QUANTITY WILL?
RISE MORE THAT PRICE HAS DROPPED, ALONG WITH TOTAL REVENUE WILL INCREASE.
WHEN DEMAND IS ELASTIC, REVENUE?
RISES AS QUANTITY DEMANDED INCREASES
IF MC > AVC, THEN AVC IS?
RISING ***ONLY OCCURS WHEN MP(L) < AP(L), THEN AP(L) IS FALLINF
WHAT IS NON-PRICE COMPETITION?
SETTING UP PRODUCT TO BE DIFFERANT TO APPEAL TO A LARGER CUSTOMER BASE
HOW WILL LOWER INCOME AFFECT DEMAND?
SHIFT DEMAND TO THE LEFT
HOW WILL HIGHER INCOME AFFECT DEMAND ?
SHIFT DEMAND TO THE RIGHT
SIZE OF INDUSTRY DECLINES?
SHIFT TO THE LEFT
THINK OF COMPARITIVE DEMAND AS?
SHIFTS IN DAMAND/SHIFTS IN SUPPLY
THE RATIONING FUNCTION OF PRICE IS A ?
SHORT TERM PHENOMENON
LEARNING LABOR EFFECT HAS AN IMPACT ON?
SHORT-RUN COST ***CAUSES SHORT-TUN AVERAGE TO SHIFT DOWNWARD
CONVERSELY, IF MARKET VALUE WAS BELOW ITS MID-RANGE?
SHORTAGE
MANAGERS MUST ANSWER WHAT - APPLE EXAMPLE?
SHOULD THE FIRM CONTINUE TO SALE DESK-TOP COMPUTERS OR FOCUS MORE ON TABLETS AND PHONES OR SOME OTHER NEW TECHNOLOGY **APPLE TAKES ADVANTAGE OF THE "FIRST MOVERS ADVANTAGE" - CREATING ITS OWN MARKET FOR OTHER TO FOLLOW ** CAN APPLE PROVIDE COST EFFECTIVE PRODUCTS TO COMPETE WITH LOWER END MARKET?
LONG-RUN PRODUCTION FUNCTION?
SHOWS MAXIMUMQUANITTY OF A GOOD OR SERVICE THAT CAN BE PRODUCED BY A SET OF INPUTS, ASSUMING THE FIRM IS FREE TO VARY THE AMOUNT OF ALL INPUTS BEING USED. NOTHING HELD CONSTANT - CHANGING FACTORS ***ADDING INPUTS, ADDING AIRPLANES, SALE AIRPLANES, LARGER PRODUCTION FACILITY... RETURN TO SCALE = HOW MUCH TOTAL WILL TOTAL OUTPUT INCREASE AS WE INCREASE INPUTS.
OLIGOPOLY INFO
SMALL # OF LARGE MUTUALLY INTERDEPENDANT FIRMS DIFFERENTIATED OR STANDARDIZED PRODUCT MARKET ENTRY AND EXIT DIFFICULT NON-PRICE COMPETITION ***VERRY IMPORTANT EX: NCAA - FIRMS DEVIDION 1 ATHLETIC PROGRAMS, DIFFICULT TO ENTER. LARGE FOOTBALL UNIVERSITY, FL DIFFER FROM ALABAMA BUT ALL SIGN GOV OF RULES. AIRLINES, 4 CELL PHONE CARREIRS (AT&T+SPRINT - CONCENTRATION OF POWER)
THE MORE ELASTIC DEMAND CURVE, THE...
SMLLER PRICE DECREASE BUT A LARGER QUANTITY INCREASE
PERFECT COMPETITION THERE ARE?
SO MANY SELLERS OFFERING THE SAME PRODUCT THAT AN INDIVIDUAL FIRM HAS VIRTUALLY NO CONTROL OVER THE PRICE OF ITS PRODUCT. THEREFORE THE INTERACTION OF SUPPLY AND DEMAND DECIDES THE PRICE FOR ALL PARTICIPANTS IN THE TYPE OF MARKET STRUCTURE. A FIRM IN THE MARKET ACTS AS PRICE TAKERS
WITH THE OFFERING OF SUBSTATIAL PRICE DISCOUNTS FOR SOFT DRINKS RESULTED IN AN INCREASE TO GASOLINE SALES INDICATES?
SOFT DRINKS CROSS-PRICE ELASTICITY OF DEMAN FOR GASOLINE SUGGESTS THAT SOFT DRINK ARE COMPLEMENTARY TO GASOLINE
JAPANS 5 S'S?
SORT SET IN ORDER SHINE STANDARDIZE SUSTAIN
WHAT ARE THE THREE STAGES OF SHORT-RUN PRODUCTION FUNCTION?
STAGE 1 - UNDER PRODUCTION-FAST GROWTH INITIALLY STAGE II - TOTAL PRODUCTION INCREASING/MAXIMIZATION STAGE III - MORE VARIABLE INPUT TO PRODUCE LESS OUTPUT CORPORATION GOAL IS TO OPERATE AT STAGE II OF PRODUCTION
WHAT DO SHARHOLDERS PROVIDE TO MANAGERS/EMPLOYEES TO TIP THE SCALE TOWARDS SHAREHOLDERS GOALS?
STOCK OPTIONS TO ALIGN SHAREHOLDER GOALS
WAYS COMANIES REDUCE COSTS?
STRATEGIC USE OF COSTS - DESIGNING NEXT CAPITOL PRDUCT TO IMPROVE EFFICIENCY, NEW NEW CHEAPER SOURCE OF MATERIAL INFORMAITON TECHNOLOGY REDUCTION OF PROCESS COST RELOCATING/OUTSCOURCING/OFFSHORING MERGING, CONSOLIDATING LAYOFF'S AND PLANT CLOSING
WHAT IS THE MEANING OF RELATE PRODUCT? 2 TYPES OF RELATIONSHIPS?
SUBSTITUTE GOODS COMPLEMENTARY GOODS
PRICE OF RELATED PRODUCTS
SUBSTITUTE/COMPLIMENTARY PRODUCT CHANGES: IE:SOFTWARE-->COMPUTER HARDWARE, MUSIC DOWNLOADS--> MP3 PLAYERS FALL PIZZA SUBSTITUTE FOR FRIED CHICKEN = AS PRICE FOR PIZZA FALLS, THE DAMAND FOR FRIED CHICKEN SHOULD FALLS COMPLIMENTS EX: PEUNEUT BUTTER & JELLY = AS THE PRICE OF PEANUT BUTTER RISES, THE DEMAND FOR JELLY SHOULD FALL.
MARKET DEMAND IS THE?
SUM OF ALL INDIVIDUAL DEMANDS EX: PRICING/DESIRE TO PUCHASE PIZZA QP1 = PERSON # 1 BUYS 0 @ $2 QP2...QP3 QPM = TOTAL OF MARKET - SO SUM OF ALL PEOPLE+# OF PIZZAS IN CATEGORY
EXAMPLE OF SUPPLY/DEMAND RELATIONSHIP? LAPTOPS FACE A DECREASE IN DEMAND AS THE DEAMDN FOR WHAT INCREASES?
TABLETS & SMART PHONES
TO SOLVE FOR ELASTICITY = INSTRUCTOR NOTES...
TAKE THE CHANGE IN QUANTITY AND DEVIDE BY THE AVERAGE IN QUANTITY THEN DIVIDE BY THE CHANGE IN PRICE BY THE AVERAGE CHANGE IN PRICE
NON-PRICE DETERMINANTS OF DEMAND LISTED:
TASTES & PREFERENCES INCOME PROCES OF SUBSTITUES AND COMPLEMENTS NUMBER OF BUYERS FUTURE EXPECTATIONS OF BUYERS ABOUT PRODUCT PRICE
ECONOMIES OD SCALE GENERALLY MEANS/
THAT A COMPANIES AVERAGE COST DECREASES AT HIGHER LEVELS OF OUTPUT. SCALE = LONG-RUN TIME PERIOD DIFFERENCES B/W "SHORT RUN ECONMY OF SCALE" (SPREADING FIXED COSTS) AND "LONG RUN ECONOMY OF SCALE" EXIST
ASSUMING CONSTANT INPUT PRICES OVER TIME MEANS?
THAT IF A FIRMS OUTPUT INCREASES BY SOME PERCENTAGE, ITS TOTAL COST OF PRODUCTION INCREASES BY SOME LESSER PERCENTAGE
2 PRODUCTS ARE CONSIDERED GOOD SUBSTITUES OR COMPLIMENTS WHEN?
THE COEFFICIENT IS LARGER THAN 0.5 (DONT FORGET NEGATIVE/POSITIVE RELATIONSHIP)
MARGINAL COST
THE COST IT TAKES TO ACTUALLY PRODUCE THE PLATE
EXAMPLE OF A PRICE LEADER?
THE EXPECATION THAT IF A FIRM RAISES ITS PRICE, IT EXPECTS OTHER COMPARABLE FIRMS TO FOLLOW. TO INLCUDE IF IT LOWERS ITS PRICE, IT WILL FOLLOW AS WELL, BUT WILL NOT GO BELOW THE PRICE LEADERS PRICE. - WOULD TRIGGER A PRICE WAR THAT WOULD HURT THE ENTIRE INDUCTRY
THE ROLE OF THE PRICE LEADER IN AN OLIGOPOLY IS ASSUMED BY THE COMANY THAT HAS?
THE FIRM WITH THE LARGEST SHARE OF THE MARKET
CROSS-PRICE ELASTICITY DEALS WITH?
THE IMPACT (IN PERCENTAGE TERMS) ON THE QUANTITY DEMANDED OF A PARTICULAR PRODUCT CREATED BY A PRICE CHANGE IN RELATED PRODUCT (WHILE EVERYTHING ELSE REMAINS CONSTANT)
SATISFI-CING IS?
THE LACK OF KNOWLEDGE OR THE NOT-NEEDING-TO-KNOW HOW COMPANY IS BEING MANAGED OR RAN, ESPECIALLY IF PROFIT SALES AND DIVIDENDS ARE RISING. AIM TO SATISFY RATHER THAN BEING THE "BEST" PERFORMER
LAW OF DEMAND IS TIED TO?
THE LOWER PRICE THERE WILL BE A HIGHER DEMAND/CHANCE THAT THE CONSUMER WILL PURCHASE MORE OF A PARTICULAR PRODUCE IE: INVERSE RELATIONSHIP B/W PRICE AND QUANTITY
IF A MARKET HAS NOT REACHED "NORMAL" LEVEL, IT IS STATED THAT?
THE MARKET IS STILL ADJUSTING TOWARD LONG-RUN EQUILIBRIUM
ECONOMIC THEORY STATES THAT IN THE LONG RUN,
THE MARKET PRICE WILL SETTLE AT THE POINT WHERE THESE FIRMS EARN A NORMAL PROFIT
NUMBER OF BUYERS
THE MORE THE BETTER, HOWEVER, POPULATION CHANGES CAN DRASTICALLY EFFECT SALES/DEMAND FOR A PARTICULAR PRODUCT EX: MORE BUYER = MORE DEMAND FOR RESTURANTS...
REVENUE REACHES ITS PEAK WHEN?
THE POINT OF UNITARY ELASTICITY AND DESCENDS AS QUANTITY RISES ON THE DEMAND CURVES INELELASTIC SECTOR
MARKET POWER IS?
THE POWER OF A FIRM TO ESTABLISH THE PRICE OF ITS PRODUCTS
THE RARE OUTLYER THAT DEVIATES FROM THE LAW OF DEMAND IS WHEN?
THE PURCHASING OF A PRODUCT IS TIED TO THE QUALITY OF IT. MEANING CONSUMERS MAY PURCHASE MROE OF A PRODUCT IF THEY DEEM THE QUALITY HIGH ENOUGH FOR IT.
MARGINAL COST IS DIRECTLY RELATED TO THE MARGINAL PRODUCT WHERE?
THE RATE OF CHANGE IN TOTAL VARIABLE COST EQUATION: MC = CHANGE IN TVC/CHANGE IN QUANTITY OF MC = CHANGE IN TC/CHANGE IN QUANTITY TVC: TOTAL VARIABLE COST TC: TOTAL COST **MARGINAL COST IS EITHER THE CHANGE IN TOTAL VARIABLE COST OR THE CHANGE IN TOTAL COST WITH REPECT TO THE CHANGE IN OUTPUT.
SHORT RUN VS LONG RUN IS RELATED TO?
THE TIME IT TAKES FOR SELLERS AND BUYERS TO REACT TO CHANGES IN THE MARKET EQUILIBRIUM PRICE... ** NOT NECESSARILY DIRECTLY RELATED TO CALENDAR TIME.
PERFECT MARKET AND MONOPOLY CAN BE CONSIDERED?
THE TWO EXTREME MARKET ENVIRONMENT IN WHICH A FIRM COMPETES IN TERMS OF MARKET POWER.
DIFFERENCE BETWEN DEMAND AND SUPPLY DEFINITION?
THE WORD "SELL" IS USED INSTEAD OF "BUY"
IF UNIT COST DURING PRODUCTION INCREASES, THEN?
THERE IS WILL BE A DECREASE IN MARKET SUPLY
IF PRODUCTION FUNCITON ESTIMATE IS TO BE ACOMPLISHED USING REGRESSION ANALYSIS, THEN WE MUST CHOOS EBETWEEN?
TIME SERIES ANALYSIS OR CROSS-SECTIONAL ANALYSIS
EACH TIME OUTPUT DOUBLES, COST OF PRODUCING THE NEXT INCREMENT OF OUTPUT DECREASES
TO 80% OF THE PREVIOUS LEVEL (DECLINES 20% FROM PREVIOUS LEVEL
EXAMPLE: IF A FIRMS LONG-RUN AVERAGE COST DECLINES AS OUTPUT INCREASES, THE FIRM IS SAID
TO BE EXPERIENCING ECONOMIES OF SCALE
AS OUTPUT INCREASES?
TOTAL COST FIRST INCREASES AT A DECREASING RATE, AND THEN AT SOME POINT IT INCREASES AT AN INCREASING RATE. WHAT?!
THE MOST COMMON FORM OF THE SHORT-RUN COST FUNCTION IS?
TOTAL COST FUNCTION *** THE CUBIC RELATIONSHIP BETWEEN TOTAL COST AND OUTPUT
AS OUTPUT INCREASES WE NOTICE THAT?
TOTAL COST INCREASES, BUT NOT AT A CONSTANT RATE. THE RATE OF CHANGE OF THE LONG-RUN TOTAL COST FUNCTION IS CALLED THE MARGINAL COST (LONG-RUN MARGINAL COST, TO BE MORE PRECISE,
TOTAL LABOR COSTS (TLC)?
TOTAL COST OF USING THE VARIABLE INPUT, LABOR, COMPUTED BY MULTIPLYING THE WAGE RATE (WHICH WE ASSUME IS A GIVEN CONSTANT DOLAR AMOUNT) BY THE NUMBER OF VARIABLE INPUTS EMPLOYED (WAGE RATE X "X") EX: TOTAL PAYROLL OF ALL PHYSICAL THERAPIST
PROFIT CAN BE GRAPHICALLY BY RECTANGULAR SIZES, THE LARGE RECTANGLE EQUALS?
TOTAL REVENUE THE SMALLER RECTANGLE DEPICTING TOTAL COST
IN A PERFECTLY COMPETITIVE MARKET, THERE IS NO LIMIT TO THE AMOUNT OF?
TOTAL REVENUE THAT FIRMS CAN OBTIAN. THE MORE IT PRODUCES, THE GREATER THE REVENUE IT CAN OBTAIN.
COSTS INCURRED OUTSIDE OF THE AGENCY AND ARE TERMED "MARKET-COSTS" ARE CALLED?
TRANSACTION COSTS & THEY OCCUR WHEN A COMPANY ENTERS INTO A CONTRACT WITH OTHER ENTITIES EX: COST OF SEARCH AND INVESTIGATION CONTRACT NEGOTIATIONS COORDINATION OR ENFORCEMENT
POWER FUNCTION PERMITS?
TRANSFORMED INTO LINEAR FUNCTION WHEN IT IS EXPRESSED IN LOGARITHMIC TERMS, MAKIMNG IT AMENABLE TO LINEAR REGRESSION PERMITS THE ESTIMATION OF MARGINAL PRODUCT (IE: WHEN LABOR CHANGES AND CAPITAL REMAINS THE SAME) AND OF RETURNS O SCALE (WHEN BOTH CARIABLES CHANGE)
EXAMPLE OF SUBSTITUTES?
TWO CONVENIENT STORES SALING THE SAME SODAS 1 CONVENIENT STORE SALING MULTIPLE OPTIONS OF SODAS CHICKEN VS BEEF OPTIONS COFFEE VS ENERGY DRINKS XBOX VS PLAYSTATION
FIRST MOVER ADVANTAGE? (APPLE)
The ability of an innovative company to achieve long-term competitive advantages by being the first to offer a certain product in the marketplace
FIRM IS A PRICE TAKER IN THE INPUT MARKET EXAMPLE?
WAFFLE HOUSE TAKES THE PRICE OF A T-BONE STEAK, THEN SALES AT A HIGHER PRICE TO SALE IT.
INTERDEPENDANCE IS?
WATCHING WHAT POTHER FIRMS ARE DOING, PROGRESS, AND ADJUSTING TO THOSE TERMS
WHAT IS THE MOST ESSENTIAL THING TO A BUSINESS PERSEON?
WETHER A DECREASE IN PRIVE WILL CREATE SUGGICIENTLY MORE QUANTITY TO IMPROVE PROFITS
STRATEGY QUESTIONS?
WHAT BUSINESS SHOULD WE BE IN? PRODUCT DIFFERENTIATION? WHAT AREE OUR LONG-RUN STRATEGIES? VS ADJUSTING SHORT-RUN
COMPARATIVE STATICS ANALYS IS?
WHAT-IF ANALYSIS COMPARING THE DIFFERENCES THAT OCCURE ARE MARKET CHANGES CHANGE OVER TIME STATIC ELLUDES TO - THEORETICALLY STABLE PPINT OF EQUILIBRIUM (USED AS A BASELINE)
DIFFERENT TYPES OF SCALE ECONMIES ARE REPRESENTED AS A ?
U-SHAPED CURVE
THE INCREASE IN COMPETITION, SUBSTITUITIONS, AND INCREASES IN DEMAND ELASTICITIES FACING FIRMS RESULTS IN?
ULTIMATE BENFICIARIES TO CONSUMER
TRANSACTION COSTS ARE INFLUENCED BY WHAT?
UNCERTAINTY FREQUENCY OF RECURRENCE **ASSET SPECIFICITY - MOST IMPORTANT
WHAT IF THE CLOUD STORAGE DEVICE IS SLOW - CUMBERSOME TO USE, KEY STROKES THAT ARE NOT SUBSTITUTES FOR WILL THEN RESULT IN?
UNEFFECTIVE UNLESS QUALITY IS CORRECTED
LEAN MANUFACTURER IS?
US WORKERS HIGH QUALITY WORKERS BUT HIGH WAGE WORKERS.
MANAGERIAL ECONOMICS IS THE?
USE OF ECONOMIC ANALYSIS TO MAKE BUSINESS DECISIONS INVOLVING THE BEST USE OF AN ORGANIZATIONS SCARCE RESOURCES
SELLER USUALLY KNOWS MORE ABOUT THE CAR THAN THE BUYER IN A?
USED CAR MARKET (LEMONS)
TOTAL VARIABLE COSTS USING WAFFLE HOUSE EXAMPLE?
VARIABLE INPUT = SERVERS, MATERIALS, T-BONE STAK, EGGS, BACON...
WHAT IS INCREMENTAL COSTS?
VARIATION IN COST WITH THE RANGE OF OPTIONS AVAILABLE IN A DECISION. EX: IF MARKET VALUE OF CHIPS FALL TO 550,000. THE STATED VALUE OF INCOME IS NOW THE ENW STATED MARKET VALUE INSTEAD OF THE PURCHASED VALUE FOF $750,000
WHEN DOES THE TOTAL COST BEGIN INCREASING AT AN INCREASING RATE?
WHEN THE LAW OF DININISHING RETURN TAKES AFFECT **THE FIRM WILL BEGIN TO EXPERIENCE DECREASING RETURNS TO ITS VARIABLE FACTOS
WHEN IS DERIVED DEMAND AN ELASTIC? CONSIDER BOSS ANALOGY...
WHEN WILL THE BOSS NOT BE VERY PRICE SENSITIVE? FIRST OF ALL - **IE IF YOUR "ESSENTIAL" TO PRODUCTION PROCESS OF SERVICES YOU "CANT" BE SUBSTITUTED SECONDLY: IF BOSS COULD PASS PRICES ONTO THE CUSTOMER, THEN DERIVED DEMAND CURVE IS ELASTIC
***ASSUMING X TO BE VARIABLE - DISPLAY AP EQUATION?
X = APx = Q/X
***ASSUMING X TO BE VARIABLE - DISPLAY MP EQUATION?
X = MPx = CHANGE IN QUANITY/CHANGE IN X, HOLDING Y CONSTANT
define non price competition?
any effort made by firms other than a change in tHE PRICE OF THE PRODUCT IN QUESTION IN ORDER TO INFLUENCE THE DEMAND FOR THEIR PRODUCT.
MARGINAL REVENUE =
dTR/dQ = a - 2bQ ***REVERSES DEMAND FUNCTION SO THAT QUANTITY BECOMES THE INDIPENDANT VARIABLE
WHAT IS THE PRODUCTION FUNCTION?
instructor states: WHEN INPUTS COME TOGETHER TO PRODUCE A LEVEL OF OUTPUT - EX: LABOR (X) HARDWARE (X2) SOTWARE (X3)... STATEMENT OF THE RELATIONSHIP B/W A FIRMS SCARCE RESOURCES (INPUTS) AND THE OUTPUTS THAT RESULTS FROM THE USE OF THOSE RESOURCES
INCOME ELASTICITY
represents consumers changes in expenditures in relation to changes in incomeOR DEFINED AS A MEASURE OF THE PERCENTAGE CHANGE IN QUANTITY CONSUMED RESULTING FROM A 1 PERCENT CHANGE IN INCOME