EC260 Chapter Notes - Chapter 2: Normal Good, Marginal Revenue, Strategic Management

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25 Oct 2017
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Industry and firm demand functions: market demand function: the relationship between the quantity demanded and the various factors that influence this quantity, quantity of x (q)=f (factors, factors: Income of consumers: price of x, consumer tast, prices of other goods, population, advertising expenditure, example: (cid:1843)=(cid:2869)(cid:1842)+(cid:2870)+(cid:2871)+(cid:2872, assumes that population is constant and that the demand function is linear, p=price of tablets. I(cid:374)(cid:272)(cid:396)ease i(cid:374) (cid:272)o(cid:373)petito(cid:396)"s p(cid:396)i(cid:272)e (cid:449)ill (cid:272)ause a(cid:374) i(cid:374)(cid:272)(cid:396)ease i(cid:374) a fi(cid:396)(cid:373)"s de(cid:373)a(cid:374)d: de(cid:272)(cid:396)ease i(cid:374) (cid:272)o(cid:373)petito(cid:396)"s p(cid:396)i(cid:272)e (cid:449)ill (cid:272)ause a de(cid:272)(cid:396)ease i(cid:374) a fi(cid:396)(cid:373)"s de(cid:373)a(cid:374)d. Inversely related to the prices of substitute goods provided by competitors. Increase in competito(cid:396)"s p(cid:396)i(cid:272)e (cid:449)ill (cid:272)ause a de(cid:272)(cid:396)ease i(cid:374) a fi(cid:396)(cid:373)"s de(cid:373)a(cid:374)d: de(cid:272)(cid:396)ease i(cid:374) (cid:272)o(cid:373)petito(cid:396)"s p(cid:396)i(cid:272)e (cid:449)ill (cid:272)ause a(cid:374) i(cid:374)(cid:272)(cid:396)ease i(cid:374) a fi(cid:396)(cid:373)"s de(cid:373)a(cid:374)d. If price rises, quantity demanded falls to zero. If price falls, quantity demanded increases without limit. Linear demand curves: the slope of a linear demand curve is constant. The difference will be small if the change is small.

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