MBA UGBS 603: Economics
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Lecture Slides:
Course outline is below
Lectures 1 & 2 on Intro, demand & supply is below
Lecture 3 & 4 on elasticity is below
Lecture 5 & 6 on consumer theory is below
Lecture 7 on production & cost is below Lecture 8 on_Perfect_Competition
Lecture 9 on monopolistic competition, monopoly, market power measures - Lerner, HHI, CRn are below
Lecture 10 on Economics MBA L10 Oligopoly & Games - st.pdf
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QUESTIONS ON DEMAND & SUPPLY
A rise in the price of air-condition will reduce the quantity demanded of fan. True or False. Draw and Explain
A fall in the disposable income will reduce the demand for shirts. True or False
The demand for pen drive has fallen. This was caused by the rise in the price of CDs. True or False?
1. Explain why a situation of excess demand will result in an increase in the market price. Why will a situation of excess supply result in a decrease in the market price?
2. Using supply and demand curves to illustrate the impact of the following events on the market for coffee:
a) The price of tea goes up by 100 per cent
b) A study is released that links consumption of caffeine to the incidence of cancer.
c) A frost kill half of the Colombian coffee bean crop
d) The price of Styrofoam coffee cups goes up by 300 per cent
3. Suppose we observed that the price of soybeans goes up, while the quantity of soybeans sold goes up as well. Use supply and demand curves to illustrate two possible explanations for this pattern of price and quantity changes.
4. A 10 per cent increase in the price of automobiles reduces the quantity of automobiles demanded by 8 per cent. What is the price elasticity of demand for automobiles?
5. A linear demand curve has the equation Q=50-100P. What is the choke price?
6. Explain why we might expect the price elasticity of demand for speedboats to be more negative than the price elasticity of demand for light bulbs.
7. Many business travellers received reimbursement from their companies when they travel by air, whereas
8. Explain why the price elasticity of demand for an entire product category (such as yogurt) is likely to be less negative than the price elasticity of demand for a typical brand (such as Dannon) within that product category.
9. What does the sign of the cross-price elasticity f demand between two goods tell us about the nature of the relationship between his goods?
10. Explain why a shift in the demand curve identifies the supply curve and not the demand curve
Attempt
• When a person goes to the grocery store to buy food, there is no auctioneer calling out prices for bread, milk, and other items. Therefore, supply and demand cannot be operative. Do you agree or disagree? Explain your answer.
• The price of a given-quality personal computer is lower today than it was five years ago. Is this necessarily the result of a lower demand for computers? Explain your answer.
• As Akua’s income rises, her demand for popcorn rises. As Mark’s income falls, his demand for prepaid telephone cards rises. What kinds of goods are popcorn and telephone cards for the people who demand each?
Assignment 1:
• The Mirror article points out that the price of economics textbooks is up 10 percent this year over last year, and yet the number of textbooks sold is higher this year. This article claims that these figures show that the law of demand does not apply to textbook. Is there a flaw in this argument? (Hint: A textbook is not a giffen good.)
• Do buyers prefer lower prices to higher prices? Well, what buyer would pay a higher P for anything anyway? But wait a minute! Price ceilings are often lower than P*. Does it follow that buyers prefer price ceilings to equilibrium prices?
Assignment 2
• The demand equation for a product is Q=50-2.25P. Calculate the point-price elasticity of demand if P=2. • According to an FTC Federal by Michael Ward, AT&T’s own price elasticity of demand for long distance services is -8.64. AT&T needs to boost revenues in order to meet it’s marketing goals. To accomplish this goal, should AT&T raise or lower it’s price? If AT&T lowered price by 3 percent, what would happen to the volume of long distance telephone calls routed through AT&T? According to an FTC Report by Michael Ward, AT&T’s cross price elasticity of demand for long distance services is 9.06. If competitors reduced their prices by 4 percent, what would happen to the demand for AT&T services?