Managerial economics Business strategy Chapter 2 Market Forces: Demand and Supply Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Managerial Economics & Business Strategy Chapter 2 Market Forces: Demand and Supply
Overview I Market Demand Curve III Market Equilibrium a The demand function I Price restrictions Determinants of demand Consumer Surplus V. Comparative Statics IL. Market Supply Curve The Supply function Supply shifters Producer Surplus Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Overview III. Market Equilibrium IV. Price Restrictions V. Comparative Statics II. Market Supply Curve The Supply Function Supply Shifters Producer Surplus I. Market Demand Curve The Demand Function Determinants of Demand Consumer Surplus
Market demand curve Shows the amount of a good that will be purchased at alternative prices Law of demand The demand curve is downward sloping Ice D Quantity Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Market Demand Curve • Shows the amount of a good that will be purchased at alternative prices. • Law of Demand The demand curve is downward sloping. Quantity D Price
Determinants of demand Income Prices of substitutes Prices of complements Advertising Population Consumer expectations Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Determinants of Demand • Income • Prices of substitutes • Prices of complements • Advertising • Population • Consumer expectations
The demand function An equation representing the demand curve Qx=f(Px, Py, m, h,) a Q= quantity demand of good X - Px= price of good X a Py- price of a substitute good Y M=income -H= any other variable affecting demand Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999
Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 The Demand Function • An equation representing the demand curve Qx d = f(Px , PY , M, H,) Qx d = quantity demand of good X. Px = price of good X. PY = price of a substitute good Y. M = income. H = any other variable affecting demand