Lecture 3.pptx - Topic 3 Demand Analysis Production 1 2 3 4...

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1 Topic 3: Demand Analysis & Production Learning Objectives: after the class, you should be able to: Explain the effect of price or income change on demand. Explain the income & price substitution effects. Illustrate the market demand & consumer surplus. Explain network externalities & network strategies. Analyze the technology of production Explain output decision with 1 variable input (labor) and compute MPL Explain the output decision with two variable inputs and compute MRTS Explain the concepts of returns to scale # Video Game Title Release Yr System(s) Copies sold 1 Wii Sports 2006 Wii 81.99 million 2 Super Mario Bros. 1985 NES 40.24 mil 3 Minecraft 2011 PC , Mobile Phone , Xbox 360 (XBLM and Retail disc), PlayStation 3 36 mil 4 Mario Kart Wii 2008 Wii 35.26 mil 5 Tetris 1984 Game Boy and Game Boy Color 35 mil 6 Grand Theft Auto V 2013 PlayStation 3 , Xbox 360 32.5 mil 7 Wii Sports Resort 2009 Wii 31.89 mil 8 New Super Mario Bros. 2006 Nintendo DS 30.38 mil 9 Wii Play 2006 Wii 28.02 mil 10 New Super Mario Bros. Wii 2009 Wii 27.88 mil 11 Grand Theft Auto: San Andreas 2004 PlayStation 2 , Microsoft Windows , Xbox , Mac OS X , Xbox 360 (XBLM), PlayStation 3 (PSN), Mobile Phone [3] 27.5 mil 12 Grand Theft Auto IV 2008 PlayStation 3 , Xbox 360 , Microsoft Windows 25 mil 13 Call of Duty: Black Ops 2010 Microsoft Windows , Xbox 360 , Playstation 3 and Nintendo Wii 25 mil 14 Nintendogs 2005 Nintendo DS 23.94 mil 15 Pokémon Red , Blue , and Green 1996 Game Boy and Game Boy Color 23.64 mil 16 Mario Kart DS 2005 Nintendo DS 23.34 mil 17 Pokémon Gold and Silver 1999 Game Boy and Game Boy Color 23 million 18 Wii Fit 2007 Wii 22.67 mil 19 Call of Duty: Modern Warfare 2 2009 Microsoft Windows , Xbox 360 and Playstation 3 22 mil 20 Wii Fit Plus 2009 Wii 20.86 mil 21 Super Mario World 1990 SNES 20.60 mil Which are the best seller video game?
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Individual Demand: effect of price change,∆P Price-Consumption Curve traces utility maximizing basket for each price of music: Point A: (6)($2)+(4)($2) = $20 Point B: (4)($2)+(12)($1) = $20 Point D: (5)($2)+(20)($.5) = $20 4 U 2 B 12 20 5 U 3 D iMusic (units per mth) V-games 6 A U 1 4 10 ∆P ∆Q of iMusic. See i-curves: each ∆P Q D individual would buy given b-lines & i-curves Assume: I = $20, P game = $2, P music = $2, $1, $0.50. Each P different unit of music bought. See Price Consumption Curve (ABD) and Demand curve. Demand Schedule of iMusic P m Q m $2.00 4 $1.00 12 $0.50 20 When price of music falls, P m /P g & MRS also fall See points on demand curve : E : P m /P g = 2/2 = 1 = MRS G: P m /P g = 1/2 = 0 . 5 = MRS H: P m /P g = .5/2 = 0.25 = MRS Demand Curve iMusic (units per month) Price of iMusic H E G $2.00 4 12 20 $1.00 $.50 Self-Study Notes: Assume I = $20, P game = $2, P music = $2, $1, $0.5, each price lead to different unit of music bought. By changing P D schedule & D curve of individual. Properties of D: 1. Level of utility changes as we move along D curve: lower P higher utility . 2. Utility is maximized at each point by satisfying MRS of music for games = ratio of P of music & games.
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