Managerial Econmics Brickley, Smith, Zimmerman Chapter 4 Answers

Managerial Economics and Organizational Architecture

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Unformatted text preview: Chapter 04 - Demand CHAPTER 4 DEMAND CHAPTER SUMMARY This chapter builds on a brief introduction in the previous chapter by providing a more detailed analysis of product demand. The chapter covers demand functions and demand curves. It introduces elasticities and the properties of linear demand curves. The relation between total revenue and price is examined. The chapter also provides a brief introduction to network effects, the product-attribute model, product life cycles, and demand estimation. An appendix covers point elasticities, marginal revenue for linear demand curves, and log-linear demand curves. CHAPTER OUTLINE DEMAND FUNCTIONS DEMAND CURVES Law of Demand Managerial Application: Learning the Law of Demand the Hard Way Elasticity of Demand Managerial Application: Increased Foregin Competition and Demand Elasticities Calculating Price Elasticities Price Changes and Total Revenue Determinants of Price Elasticities Academic Application: Price Elasticities Managerial Application: Demand Elasticities and Airline Pricing Linear Demand Curves Total Revenue Marginal Revenue Profit Maximization OTHER FACTORS THAT INFLUENCE DEMAND Prices of Related Products Complements versus Substitutes Managerial Application: Complementarity between Computer Hardware and Software Managerial Application: Derived Demand Cross Elasticities Academic Application: Estimates of Cross Elasticities Income Normal versus Inferior Goods Managerial Application: Russian Cola Wars 4-1 Chapter 04 - Demand Income Elasticities Academic Application: Estimates of Income Elasticities Managerial Application: A Pampered Dog Loses His Stylist Other Variables INDUSTRY VERSUS FIRM DEMAND Industry Demand Curves Defining Industry and Market Area Managerial Application: 9/11 Causes Massive Shifts in Demand Curves Managerial Application: Store Layout Affects Demand Managerial Application: Demand Elasticity for Gasoline NETWORK EFFECTS Managerial Application: eBay and Network Effects PRODUCT ATTRIBUTES Managerial Application: Understanding What Consumers Want PRODUCT LIFE CYCLES Managerial Application: First-Mover Advantages and Financial Innovation DEMAND ESTIMATION Interviews Managerial Application: Using Technology to Assess Demand Price Experimentation Statistical Analysis Academic Application: On Estimating Demand Curves for Common Stocks Omission of Important Variables Multicollinearity Identification Problem Implications SUMMARY APPENDIX: DEMAND Point Elasticities Marginal Revenue for Linear Demand Curves Marginal Revenue and Demand Elasticity Log-Linear Demand Functions 4-2 Chapter 04 - Demand TEACHING THE CHAPTER This chapter reiterates the fundamentals of demand. In upper level courses that require students to complete a managerial economics or intermediate microeconomics course as a prerequisite, extensive coverage might not be as necessary, however it is essential for students to know the basic concepts in the chapter since they relate to material covered in later chapters. For example, the properties of linear demand curves are relevant in...
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Managerial Econmics Brickley, Smith, Zimmerman Chapter 4 Answers

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