Demand: Know your market - PowerPoint PPT Presentation

Loading...

PPT – Demand: Know your market PowerPoint presentation | free to download - id: 6efb8f-Mjg2M



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Demand: Know your market

Description:

Demand: Know your market Interdependent demands: Poiuyts & Qwerts Poiuyts and Qwerts are substitutes (qwerts are left-handed poiuyts) If you sell more qwerts, you ... – PowerPoint PPT presentation

Number of Views:8
Avg rating:3.0/5.0
Slides: 8
Provided by: Bernard192
Learn more at: http://faculty.unlv.edu
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Demand: Know your market


1
  • Demand Know your market
  • Interdependent demands Poiuyts Qwerts
  • Poiuyts and Qwerts are substitutes (qwerts are
    left-handed poiuyts)
  • If you sell more qwerts, youll sell fewer
    poiuyts
  • xp 9000 100 Pp xq/3 (or Pp90 - xp/100 -
    xq/300)
  • If you sell more poiuyts, youll sell fewer
    qwerts
  • xq 1200 100Pq 2 xp/3 or (Pq120-
    xq/100-xp/150 )
  • Suppose that total cost is given by
  • TC 1000 10 xp 20 xq
  • Optimal outputs of poiuyts and qwerts are where
    M?p0 given xq and M?q0 given xp
  • Your text calls price as a function of
    quantities the inverse demand function.

2
  • Poiuyts and Qwerts
  • When we optimize using Solver,
  • xp 2000 Pp 56.67 xq 4000 Pq 66.67
  • Notice, if we increase xp by 1 at this point, Pp
    declines by 1/100 and Pq declines by 1/150.
    Thus,
  • MRp 56.67(1) - .01(2000) -.0067(4000)
  • 56.67 20.00 26.67 56.67 46.67
  • 10.00
  • Since MCp 10.00, M?p 0 at the optimal
    solution.

3
Demand
  • When we speak of demand for a product, we think
    of a uniform product, a commodity.
  • When we dealt with demand for GM light trucks, we
    didnt distinguish between Buick vans and Chevy
    pick-ups we certainly didnt distinguish between
    blue pick-ups and red pick-ups. We thought of a
    generic product, light trucks.
  • Even products we normally think of as
    commodities are subtly differentiated Saudi
    oil has less(?) sulfur content than North Sea oil
    and accordingly sells for a different price.
  • We can get important insights into how the light
    truck market responds to rebates and how the oil
    market responds to business cycles without
    concerning ourselves with detailed product
    differentiation.

4
Demand Analysis The Product and its Market
  • How you define the product and its market depends
    on the questions you want to ask.
  • If all you care about is sales of red Chevy
    pick-ups to women in Las Vegas in October
  • red Chevy pick-ups is your product
  • women in Las Vegas in October is your market
  • Even then, youre abstracting from red Chevy
    pick-ups with different accessories and Las Vegas
    women of different marital status.
  • When youre the analyst,
  • you get to define the product.
  • you get to define the geography, the
    demographics, and the time period of your
    analysis.

5
Demand The Industry, The Firm
  • Competitive Industry Firm
    With
  • Industry Firm
    Market Power

  • Firm is Price Taker
    Firm is Price Maker
  • Decides
    Quantity Decides Price-Quantity
  • To
    Produce Combination
  • P
    P P

6
Price Elasticity of Demand Once More
  • Price elasticity of demand ?
  • Percent change in quantity dx/x

  • Percent change in price dp/p
  • Linear Demand Constant ?
  • x small?? high x large ? ? low x k P-a or
    xPa k
  • P
    P

7
Price Elasticity of Demand Industry and
Firm Short Run and Long Run
  • Price elasticity of demand increases the more
    substitutes there are for a product
  • The products of the all the other firms in an
    industry are good substitutes for a particular
    firms product
  • Demand for the firms product is more elastic
    than demand for the industrys product as a whole
  • Demand for a competitive firms product is
    infinite
  • Price elasticity of demand increases the more
    time buyers have to adjust to price changes
  • Elasticity is greater in the long-run than in the
    short-run
About PowerShow.com