武汉大学MBA管理经济学PPT三.pptVIP

OVERVIEW of Chapter 3 Demand Relationships Demand Elasticities Income Elasticities Cross Elasticities of Demand Appendix 3A: Indifference Curves Health Care Cigarettes Raising cigarette taxes reduces smoking In Canada, $4 for a pack of cigarettes reduced smoking 38% in a decade But cigarette taxes also helps fund health care initiatives The issue then, should we find a tax rate that maximizes tax revenues? Or a tax rate that reduces smoking? Demand Analysis An important contributor to firm risk arises from sudden shifts in demand for the product or service. Demand analysis serves two managerial objectives: (1) it provides the insights necessary for effective management of demand, and (2) it aids in forecasting sales and revenues. Demand Curves Individual Demand Curve the greatest quantity of a good demanded at each price the consumers are Willing to Buy, ceteris paribus. The Market Demand Curve is the horizontal sum of the individual demand curves. The Demand Function includes all variables that influence the quantity demanded Supply Curves Firm Supply Curve - the greatest quantity of a good supplied at each price the firm is profitably able to supply, ceteris paribus. The Market Supply Curve is the horizontal sum of the firm supply curves. The Supply Function includes all variables that influence the quantity supplied Equilibrium: No Tendency to Change Superimpose demand and supply If No Excess Demand and No Excess Supply No tendency to change Downward Slope Reasons that price and quantity are negatively related include: income effect--as the price of a good declines, the consumer can purchase more of all goods since his or her real income increased. substitution effect--as the price declines, the good becomes relatively cheaper. A rational consumer maximizes satisfaction by reorganizing consumption until the marginal utility in each good per dollar is equal: Optimality Condition is MUA/PA = MUB/PB = MUC/PC = ... If MU per dollar in A