Summary
Complete summary managerial economics
- Course
- Institution
A complete summary of every slide, course and just everything you need to know for the exam
[Show more]
Seller
Follow
HIRb2
Reviews received
Content preview
1. Lecture 11.1. Part 1
How is a business plan structured?
Executive summary: explain why the business is going to be successful
Company description: describe the company’s business
Market analysis: describe what market the company is serving as well as the competitors
Service or product line: describe your product line, service line and the R&D plan
Marketing and sales: Describe the marketing strategy
Funding request and financial plan: Describe the funding you are trying to raise and the financial plan
Market demand
Quantity = f(yPrice + nIncome + xMarketing + …)
linear demand: Q = a – bP (a is the quantity when price is very small)
linear inverse demand: P = A – BQ (A is the maximum willingness to pay)
∆q
q ∆q p
Price elasticity of demand: ε = =
∆ p ∆ pq
p
o |ε| < 1: demand is inelastic => increasing price increases revenues
o |ε| > 1: demand is elastic => increasing price reduces revenues
∆ q1
q1 ∆ q 1 p2
Cross elasticity: ε 1,2= =
∆ p2 ∆ p2 q1
p2
o ε 1,2 > 0: substitute goods
o ε 1,2< 0: complement goods
Profit maximization
profit is the difference between revenues and costs: (q) = R(q) – C(q)
First order conditions for profit maximization: d/dq = 0
o => MR = MC
Perfect competition
firms and consumers are price-takers, a firm can sell as much as it likes at the ruling market price
1
, Therefore: marginal revenue equals price, and because MR = MC, price equals MC
Monopoly (market demand is firm demand, output decisions affect market clearing price)
Demand: P = A – BQ
Total revenue: TR = PQ = AQ – BQ2
DTR
Marginal revenue: MR = = A – 2BQ (same price intercept, twice the slope)
DQ
The monopolist maximizes profit by MR = MC: price is greater than MC: loss of efficiency & positive
economic profit
1.2.
1.2. Part 2
Total cost: C(Q)
Average cost: AC(Q) = C(Q)/Q
dC (Q)
Marginal cost: MC(Q) =
d (Q)
o if MC < AC then AC is falling
o if MC > AC then AC is rising
o MC = AC at the minimum of the AC curve
2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller HIRb2. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.16. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
66579 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now