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Chapter 2

BUS 207 Chapter Notes - Chapter 2: If And Only If, Demand Curve, Marginal Revenue

Business Administration
Course Code
BUS 207
Karen Ruckman

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Ch. 2 Optimal Decisions Using Marginal Analysis (p. 27-54)
- marginal analysis = process of considering small changes in decision &
determining whether a given change will improve the ultimate objective
make a small move to a nearby alternative iff move will improve one’s
keep moving in direction of improved objective, stop when no further
move will help
- demand equation only shows snapshot of current demand
if economic conditions change, curve will too
- we view demand curve as deterministic
at any given price, quantity sold can be predicted w/ certainty
- marginal profit = change in profit resulting from small increase in any managerial
decision variable
- marginal revenue = amount of additional revenue that comes w/ unit increase in
output & sales
- increased overhead (fixed costs): produce & sell same output at same price as
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