《管理经济学》第四章ppt课件.ppt

Demand Analysis,Chapter 4,OVERVIEW,Measuring Market DemandDemand Sensitivity Analysis: ElasticityPrice Elasticity of DemandPrice Elasticity and Marginal RevenuePrice Elasticity and Optimal Pricing PolicyCross-price Elasticity of DemandIncome Elasticity,Chapter 4KEY CONCEPTS,market demand curveelasticityendogenous variablesexogenous variablespoint elasticityarc elasticityprice elasticity of demandelastic demandunitary elasticityinelastic demand,optimal price formulasubstitutescomplementscrossprice elasticityincome elasticitynormal goodsinferior goods.counter-cyclicalnoncyclical normal goodscyclical normal goods,Measuring Market Demand,Graphing the Market Demand CurveMarket demand is total demand.Evaluating Market DemandDemand differs among market segments.Add segment demand to get market demand.,Demand Sensitivity Analysis: Elasticity,Elasticity ConceptElasticity measures sensitivity.Point and Arc ElasticityPoint elasticity reflects sensitivity of Y to small changes in X, X = Y/Y X/X.Arc elasticity reflects sensitivity of Y to big changes in X, EX = (Y2Y1)/(Y2+Y1) (X2-X1)/(X2+X1). Advertising Elasticity Example,Price Elasticity of Demand,Price Elasticity FormulaPoint price elasticity, P = Q/Q P/P.In all cases, P 1.Revenue constant if P= 1.Price cut decreases revenue if P 1.Uses of Price Elasticity Information,Price Elasticity and Marginal Revenue,How Elasticity Varies along a Demand CurveAs price rises, so does P.As price falls, so doesP.Price Elasticity and Price ChangesMR 0 if P 1.MR = 0 if P= 1.MR 0 if P 1.,Price Elasticity and Optimal Pricing Policy,Optimal Price FormulaMR and P are directly related.MR = P1+(1/ P).Optimal P = MC/1+(1/ P).The gap between MR and P will fall as the price elasticity of demand increases (in absolute value terms).,Price Elasticity and Optimal Pricing Policy,Optimal Pricing Policy ExampleDeterminants of Price ElasticityEssential goods have lowP.Nonessential goods have highP.,Determinants of price elasticity of demand,The greater the number of substitute goods that are available, the higher the price elasticity of demand e.g. movie.The price elasticity of demand will be higher the greater the proportion that spending on the item is of consumers total income e.g. car.The price elasticity of demand will be greater the longer the time period allowed consumers to adjust their spending habits e.g. petrol.,Cross-price Elasticity of Demand,Substitutes and ComplementsCross-price elasticity shows demand sensitivity to changes in other prices.PX = QY/QY PX/PX.Substitutes have PX 0.Complements have PX 0.Independent goods have PX = 0 or nearly zero.Cross-price Elasticity Example,Income Elasticity,Normal Versus Inferior GoodsIncome elasticity shows demand sensitivity to changes in income.I = Q/Q I/I.Normal goods have I 0.Inferior goods have I 1, demand is strongly affected by changing economic conditions.,Relationship between income and product demand,Problem 1,The demand for personal computers can be characterized by the following point elasticities: P=-5, Psoftware=-4, and I=2.5. Indicate whether each of the following statements is true or false, and explain your answer.A price reduction for personal computers will increase both the number of units demanded and the total revenue of sellers.The cross-price elasticity indicates that a 5 percent reduction in the price of personal computers will cause a 20 percent increase in software demand.Demand for personal computers is price elastic and computers are cyclical normal goods.,D. Falling software prices will increase revenues received by sellers of both computers and software.E. A 2 percent price reduction would be necessary to overcome the effects of a 1 percent decline in income.,Problem 2,In an effort to reduce excess end-of-the-model-year inventory, Harrison Ford offered a 1% discount off the average price of 4WD Escape Limited SUVs sold during the month of August. Customer response was wildly enthusiastic, with unit sales rising by 50% over the previous months level.A. Calculate the point price elasticity of demand for Harrison Ford 4WD Escaped Limited SUVs sold during the month of August.B. Calculate the profit-maximizing price per unit if Harrison Ford has an average wholesale (invoice) cost of $27600 and incurs marginal selling costs of $330 per unit.,Problem 3,Enchantment Cosmetics, Inc., offers a line of cosmetic and perfume products marketed through leading department stores. Product manager Erica Kane recently raised the suggested retail price on a popular line of mascara products from $9 to $12 following increases in the costs of labor and materials. Unfortunately, sales dropped sharply from 16200 to 9000 units per month. In an effort to regain lost sales, Enchantment ran a coupon promotion featuring $5 off the new regular price. Coupon printing and distribution costs totaled $500 per month and represented a substantial increase over the typical advertising budget of $3250 per month. Despite these added costs, the promotion was judged to be a success, as it proved to be highly popular with consumers. In the period prior to expiration, coupons were used on 40 percent of all purchases and monthly sales rose to 15000 units.,Calculate the arc price elasticity implied by the initial response to the Enchantment price increase.Calculate the effective price reduction resulting from the coupon promotion.In light of the price reduction associated with the coupon promotion and assuming no change in the price elasticity of demand, calculate Enchantments arc advertising elasticity.Why might the true arc advertising elasticity differ from that calculated in part C?,Problem 4,Desktop Publishing Software, Inc., develops and markets software packages for business computers. Although sales have grown rapidly during recent years, the companys management fears that a recent onslaught of new competitors may severely retard future growth opportunities. Therefore, it believes that the time has come to “get big or get out.” The marketing and accounting departments have provided management with the following monthly demand and cost information:P=$1000-$1Q TC=$50000+$100QMR=TR/Q=$1000-$2Q MC=TC/Q=$100,Set MR=0 and solve for Q to calculate monthly quantity, price, revenue, and profit at the short-run revenue-maximizing output level.Set MR=MC and solve for Q to calculate these same values for the short-run profit-maximizing level of output.When would short-run revenue maximization lead to long-run profit maximization?,