1 Welcome to EC 209: Managerial Economics- Group A By: Dr. Jacqueline Khorassani Study Guide Week Two (Note: You must go over these slides and complete every task outlined here before Thursday, September 13)

2 Chapter Two: This chapter is mainly a review of what you learned in First Commerce. Send me your questions. Demand function, schedule, and curve –What are they? –How does the demand function or schedule look graphically and why? Slope What is the law of demand? How can the demand curve shift? –What are the demand determinants other than price? What is the difference between a change in demand and a change in quantity demanded? –What is an inverse demand function? –What is the consumer surplus? How is it measured? –Graphically? –Algebraically?

3 Supply function, schedule, and curve What are they? How does the supply function or schedule look graphically and why? –Slope –What is the law of supply? –How can the supply curve shift? What are the supply determinants other than price? –What is the difference between a change in supply and a change in quantity supplied? What is an inverse supply function? What is the producer surplus? –How is it measured? Graphically? Algebraically?

4 Market Equilibrium What is it? How does it look graphically? –What is a shortage? –What is a surplus? How can it change? –Shifts in supply curve Effects on quantity demanded and quantity supplied –Shifts in demand curve Effects on quantity demanded and quantity supplied –How can a change in equilibrium affect the managerial decisions?

5 What are the different types of price restrictions? How is a price ceiling different from a price floor? What are some examples of price ceilings and price floors? How does a price ceiling or a price floor affect the market? –Graph Effects on quantity demanded and quantity supplied What is a full economic price under a price ceiling?

6 Chapter 3: This chapter is also mainly a review of what you learned in First Commerce. Send me your questions. What does the elasticity measure? –How can it be shown (measured) using calculus? –What is the difference between point versus Arc (Mid-point) elasticity?

7 What is the own price elasticity of demand? How is it measured? Is it positive or negative? What is the difference between elastic, inelastic and unitary elastic demands? How is a perfectly elastic demand curve different from a perfectly inelastic demand curve? Which factors affect it and how?

8 How does the own-price elasticity related to total revenue? The case of elastic, inelastic, and unitary elastic demands –Graphical representation How does the own-price elasticity related to marginal revenue?

9 What is the cross price elasticity of demand? How is it measured? When is it positive? When is it negative? Suppose that a firm sells two related good and the price of one good changes; how can the cross price elasticity help us predict the changes in the total revenue?

10 What is the income elasticity? How is it measured? When is it positive? When is it negative?

11 Uses of elasticity How can the elasticity help the manager in his/her pricing strategies? How can the elasticity help the manger in predicating the revenue? How can the elasticity help the manager to determine the effects of a change in a competitor’s price?

12 Mathematical representations of demand curves Linear demand –What do the coefficients mean? How are they related to elasticity? –How does it look graphically? Log-Linear Demand –What do the coefficients mean? How are they related to elasticity? –How does it look graphically?

13 What is regression analysis? How can it be used to estimate demand? How can we interpreting the regression output?