3551 - Commentary _2 - Sp-08

3551 - Commentary _2 - Sp-08 - Managerial Economics and...

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Economics 3551 ONLINE Managerial Economics and Business Strategy Spring 2008 Commentary for the Second Assignment Readings: (Note Changes from the Tentative Reading Assignment) Chapter 7, pp. 276-295 (Elasticity) Chapter 11, pp. 439-445; pp. 458-464 (Price Discrimination) A Note about the Commentaries Use the Commentaries along with the assigned readings from the text. The Commentaries are designed to support the text and to draw your attention to important terms, issues, and concepts. They may also be used to present material in a different fashion from the text and to create a unified presentation. This last function is particularly important in light of how I have re-arranged the text readings. The Commentaries are essentially the “classroom” part of the course, that is, it is a vehicle that will take us beyond a simple set of readings. You should use the Study Questions in conjunction with both the Commentary and the readings from the text. The Study Questions will better focus the topics and readings. In general, these are questions that relate to the important terms, concepts, and issues. In addition, these questions will be featured on the actual assignment. Each week’s assignment will feature a random draw of questions from that week’s Study Questions. A Note about the Second Reading Assignment The reading assignment for the Second Assignment has been reduced from what originally appeared on the Tentative Reading Schedule. I have changed it to better group topics and to better accommodate time. Most of the readings that were removed from this assignment have been moved to future assignments. Commentary for Assignment Two Elasticity Last week, in the First Commentary, we introduced elasticity as a means of assessing the price sensitivity or price responsiveness of demand. This week, we will look at the practical matter of making use of elasticity. This discussion is not formula-oriented; it is application-oriented. The art of business is to be able to apply theoretical concepts in a world of uncertainty and incomplete knowledge. This may not be an ideal situation to anyone’s liking, but it is the case. In the case of elasticity, there are very few instances when you can do a formal measure of the elasticity of demand (in fact, many of the actual empirical elasticities that I will offer here were measured quite sometime ago). Formal measures of elasticity take a long time and are very expensive. Most business decisions have to be made quickly, before the formal studies can be completed.
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Does this mean that elasticity is of no value to business decision makers? No, it does not. I would maintain that elasticity is so important to doing business that if you had never heard of it, you would probably have to invent it yourself. However, the business information problem does alter how
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This note was uploaded on 04/17/2008 for the course ECON 3551 taught by Professor St.clair during the Spring '08 term at CSU East Bay.

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3551 - Commentary _2 - Sp-08 - Managerial Economics and...

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