Managerial Economic chapter 4

Managerial Economic chapter 4 - Managerial Economic Chapter...

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Managerial Economic Chapter 4 1) Define the demand function. A demand function is a mathematical representation of the relation between the quantity demanded of a product and all factors that influence this demand. 2) Define the law of demand. The negative slope of demand curves has become known as the law of demand because demanded for their products varies inversely with price. 3) Define the price elasticity of demand Demand curves vary in their sensitivity of quantity demanded to price. 4) Discuss figure 4.4. We no demonstrate that the relation between revenue and price depends on the demand elasticity. If price elasticity is inelastic(less than one), then the quantity demanded is less responsive to a change in price; a percent increase in price results in less than a 1 percent decrease in quantity. Thus total revenue increases. Opposite, a price decrease results in a decrease in revenue. In contrast, if demand elasticity is unitary (equal to one), a 1 percent change in price results in an offsetting 1 percent change in quantity
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Managerial Economic chapter 4 - Managerial Economic Chapter...

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