slides1 - Economics for Managers Prof. Steven Allen NC...

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Economics for Managers Prof. Steven Allen NC State and NBER Fall 2005
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1. Topics for 8-18-05 Course overview Supply and Demand Elasticity
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2. You will learn Determinants of prices What does cost really mean Incentives within organizations Determinants of size, scope What determines profitability
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3. Differences in profitability Return on stockholders equity All industries 14.1 Pharmaceuticals 29.1 Electronic equipment 16.5 Savings institutions 5.4
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4. Differences in profitability Differences are just as striking within industries 1989-99 return on investment   Southwest 26 UAL 10 AMR   9 Delta    5
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5. Why such a difference? Protected market Sustainable advantage in product Sustainable advantage in cost If everyone else can do it as well as you,  you cannot make money on it!
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6. Course overview Prerequisites; intended audience Objectives Assignments Academic integrity Students with disabilities Texts
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7. Laws of supply and demand Laws of demand Laws of supply Equilibrium, shortage, and surplus Algebraic approach Shifts in supply, demand Examples/applications
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8. Laws of demand Why quantity demanded rises as prices  fall Substitute another good Change in disposable income This price-quantity relationship can be shown  by the equation: ) ( P Q Q D D =
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9. The Supply and Demand Model Quantity Vertical axis measures price (P) paid per unit in dollars Horizontal axis measures quantity (Q) demanded in number of units per time period Price ($ per unit) The demand curve slopes downward demonstrating that consumers are willing to buy more at a lower price as the product becomes relatively cheaper and the consumer’s real income increases.
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10. Shifts in Demand Demand shifts when there are changes in: Prices of related goods - Substitutes - Complements Income Expectations Population Consumer tastes & advertising
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11. When demand curves shift Suppose disposable  income increases. P Q P 1 Q 1 D
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12. Shift in Demand Demand Response : At  P 1  consumers  now take  Q 3  off the  market. At  P 2    consumers  now take  Q 2  off the  market. These changes yield  a new demand  curve. P Q P 1 Q 2 Q 3 Q 1 D P 2
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Demand Response : The movement of the  demand curve to the  right from  to  D’  is  an increase in  demand. The new demand  curve shows that  more will be  purchased at a given  price or a higher  price will be paid for  a given quantity. P
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This note was uploaded on 08/01/2008 for the course ECG 507 taught by Professor Allen during the Fall '05 term at N.C. State.

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slides1 - Economics for Managers Prof. Steven Allen NC...

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