Managerial Economics Class #01

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  • Topic: Supply and demand, Demand curve, Inverse demand function
  • Pages : 8 (1802 words )
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  • Published : September 28, 2012
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Managerial Economics Comm 295
Class 1

1. Course Outline 2. Introduction 3. Supply and Demand

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1. Outline
Instructor: James Brander Vista: An outline and old assignments and exams (with answers) are posted. Class notes will be posted before each class. Questions corresponding to the textbook and selected answers will be posted. Course Description: Economic foundations of managerial decision–making. The early topics review and extend material from first year economics. Later topics are new.

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Outline cont’d
Textbook: Managerial Economics, Third Custom Edition, University of British Columbia. Last year’s book, the second custom edition, is not sufficient. Clickers: All students will need a clicker by next class. Evaluation: Two Assignments – Midterm on October 26 (evening) – Class Participation (mostly clickers) – Final Exam – Total THE UNIVERSITY OF BRITISH COLUMBIA

5% each 35% 10% 45% 100%

2. Introduction: Defining Economics
1. Analysis of the allocation of scarce resources, or 2. Study of the economy – consumption (demand), production (supply), investment, employment, finance, etc . Microeconomics focuses on individual economic units: consumers, firms, workers and investors – and the markets in which they interact. Macroeconomics focuses economy-wide aggregates like unemployment, inflation, aggregate economic growth, interest rates. Managerial economics consists mostly of microeconomic topics, especially topics related to decision-making within firms. THE UNIVERSITY OF BRITISH COLUMBIA

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Why Study Managerial Economics
Objectives: 1) Learn to think like an economist 2) Learn to improve managerial decision-making Thinking like an economist requires i) a focus on economic incentives ii) marginal reasoning iii) familiarity with major models of economic behaviour including the supply and demand model iv) analytical tools such as diagrams, algebra, and calculus.

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Clicker Question 1 – A sample question
We study managerial economics because a.  It is a requirement for the B.Comm. program. b.  It is very interesting. c.  The tools we learn are important for managerial decisionmaking. d.  So we can impress our friends when we talk about the things we learn. e.  All of the above.

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3. Supply and Demand

Supply and demand does not mean you Demand a credit card and I supply the Payments THE UNIVERSITY OF BRITISH COLUMBIA

Managerial Question
One question relates to the effect of a carbon tax on activities that use gasoline? How much of a price increase can we expect?

This question is one of many that can be addressed using the supply-demand model.

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The Demand Curve
The amount of a good that consumers are willing to buy at a given price, holding other factors constant, is the quantity demanded. A demand curve shows the quantity demanded at each possible price, holding constant the other factors that influence purchases. For example, the demand curve for avocados shows the quantity of avocados that would be purchased at each price.

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A Demand Curve for Avocados
A Demand Curve. The estimated demand curve, D1, for avocados shows the relationship between the quantity demanded per month and the price per lb. The downward slope of the demand curve shows that, holding other factors that influence demand constant, consumers demand less of a good when its price is high and more when the price is low. A change in price causes a movement along the demand curve.

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Finding the Quantity Demanded at a Given Price
The demand curve hits the vertical axis at $4, indicating that no quantity is demanded when the price is $4 per lb. The demand curve hits the horizontal quantity axis at 160 million lbs, the quantity demanded if...
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