610-02 - ECO610401 Monday,September15 Topics...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
ECO 610-401 Monday, September 15 – Topics • Price Elasticity,  • Marginal Revenue • Pricing Decisions  • Pricing with Market Power  • Markup Pricing  • Price Discrimination  – Readings • Brickley et. al, Chapters 4 & 7; • Hoyt, Lectures 1:11-16-2:1-6 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Assignment for Monday, September 22 nd   Monday, September 22 nd Topics:  – Pricing with Market Power (continued);  Resources  Readings: – Brickley et. al, Chapters 5,7; – Hoyt, Lectures 2-3:103-115  Homework due (Assignment 1)
Background image of page 2
Questions to Consider for today Provide some examples of goods and services that differ in how responsive  the demand for them is to changes in price (differences in elasticity).  How can price discrimination reduce the extent of this tradeoff? What is the tradeoff a monopolist faces when making pricing decisions?   Entertainment and sporting events frequently do not sell out.  Can it be  profit-maximizing not to sell all seats to a performance? Think about some examples in which different consumers (or firms) face  different prices for the same, or almost same, product.  What might  account for these differences in prices?  Specifically are they motivated by  differences in the cost of serving or selling to customers or differences in  the customer’s willingness to pay? Frequently, goods and services are “packaged” or “bundled”.  Occasionally  firms will only sell these goods as a bundle (pure bundle) though often  they will sell the items separately and as a bundle (mixed bundling).  Think  of some examples.  Why and when might firms want to offer items as a  bundle?
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Algebraic Representation The figure that follows is given by Q D  = 100 - 10P Linear relationship  we can graph by choosing two points.   – Easiest points: – Q = 0   0 = 100 - 10P or P = 10, Q = 0  – P = 0 implying Q = 100 - 10(0) = 100 and therefore P = 0, Q = 100 Slope,  Δ  Q/  Δ  P = -10
Background image of page 4
Algebraic Representation of Supply The  algebraic  representation  of  supply  is  analogous  to  that  of demand. –     The  supply  curve  depicted  in  Figure  3  is  given  by  the equation Q s  = -50 + 10P  
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Algebraic Determination of Equilibrium Q D  = 100 - 10P (Demand)     Q S  = -50 + 10P (Supply)  Equating Q D  = Q gives       100 - 10P = -50 + 10P        20P = 150   P = 7.50 Using the Demand equation we find Q     Q = 100 – 10(7.50) = 25
Background image of page 6
Figure 5 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Q P S=-50+10P D=100-10P
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/13/2012 for the course ECONOMICS 610 taught by Professor Staff during the Fall '11 term at Gateway Tech.

Page1 / 48

610-02 - ECO610401 Monday,September15 Topics...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online