Homework Assignment 3
Due Thursday April 1
The most frequently used method for estimating demand functions is
If the Durbin Watso
Homework Assignment 2
Due Tuesday March 23
- Information on the quantities that would be purchased at different prices, ceterfs paribus, in a
given time period om a group ofrms is a
rm demand curve.
market demand curve.
rm demand schedule.
market supply s
Hornework Assignment 1
Due Thursday March 1 l
- Managerial economics uses to help managers solve problems.
. all the above
. The diiTerence between accounting and economic prot is
Supply and demand for managerial economics
Demand depends upon:
4. Related products
5. Expectations of the buyer
6. What others do and/or want
7. Geopolitical events
Simple Elasticity Example
Price Quantity Total R
Perfect Competition through Monopoly
Characteristics of PC
large # of sellers
large # of buyers
identical products (commodities)
Results of PC
P = MC (allocatively efficient)
lowest cost providers (productively efficient)
zero economic pro
Managerial Economics: Unit 1
Start with using economic reasoning to solve the following problem:
Health Carewhether or not to pay for an eye procedure that will restore
vision to someone going blind. How to decide?
Now Universal Health Caredoes this
Seasonality and Dummy Variables
A dummy variable takes on the value of 0 or 1, i.e. it is on or off.
It does not take on the values of 1, 2, 3, 4, etc
Example of an equation:
Yt = a + b1x1 + b2x2 + b3x3 + b4x4 + et
If x1 is income, Yt is the predicted val
Some examples of price discrimination
1. In the past, physicians often set their prices/fees according to ability to pay. Higher
income folks paid more, lower income folks paid less. They also regularly charge
patients with insurance more for the same ser
The Market for Lemons
Show expected values, using two potential outcomes
Show how the high quality will drop out
How can we solve this problem?
It is fundamentally a lack of information by one party, so the solution is
Agriculture Futures markets and the Planned Planting report
Each winter a survey is conducted to determine the planned crop plantings for the
How might this report be relevant for forecasting?
This year there is a decline in the planned p
We will use regression analysisa way to see how a dependent variable changes
with respect to changes in an independent variable
In order for this regression analysis to have any useful validity you must have an
Estimating costs through regression analysis:
1. Define what a cost is. Use opportunity costs, not just the typical accounting
costs. Tax laws affect these accounting costs.
2. Correct for price changes over time, so that you can get an accurate reading
Some notes on Cost
Recall the math on the board. We developed optimum conditions for production, based
on maximizing profit, minimizing output, minimizing cost.
Heres a summary of sorts:
Maximizing profit: max profit = total revenue total cost
Prerequisites of a good forecast:
1. Must be internally consistent
all internal forecasts need to be consistent, i.e., forecasts of output
must be consistent with forecasts for costs and capacity, etc
2. Must have a good sense of history