ECON 1201 Lecture Notes - Lecture 7: Pricing Strategies, Price Discrimination, Monopolistic Competition

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ECON 1201 Full Course Notes

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Micro 1201 exam summery ch 3 & 11 16. Below are the main points of interest of each chapter. Chapter 3- review all definitions, terms and explanations related to the graphs. Laws of demand and supply- why d and s curves are sloped as they are. The determinants of demand and supply- know how a change of each affects the market. There will be a number of questions of market situations as discussed at the end of the chapter. 8-10 questions on supply/demand (most will be applications) Chapter 11- review all definitions, terms and explanations related to the graphs. Long run average cost- economies of scale & diseconomies. Be familiar with all of the various types of costs as discussed. Be able to graph all of the costs. Explicit cost is actual paying with check or other like cash. Implicit is non monetary and more like opportunity cost. Economies of scale- main motivation for firm mergers.

Related Questions

Price Elasticity		Income Elasticity		Cross-Price Elasticity
\|ep\| > 1	Elastic	ei < 0 ei > 0	Inferior good Normal good	ec < 0	Complementary good
\|ep\| < 1	Inelastic	0< ei < 1 ei > 1	Necessity Luxury	ec > 0	Substitute good
\|ep\| = 1	Unit Elastic

Technical Questions

Using the elasticity table (above), you have the following information for your product: (1) The price elasticity of demand is -2.0; (2) The income elasticity of demand is 1.5; and, (3) The cross-price elasticity of a related good is -3.5. What can you determine about consumer demand for your product from this information?â¨â¨

Using the elasticity table (above), you have the following information for your product: (1) The price elasticity of demand is -.9; (2) The income elasticity of demand is .5; and, (3) The cross-price elasticity of a related good is 2.0. What can you determine about consumer demand for your product from this information?

What are the three determinants of price elasticity of demand

What are the three determinants of price elasticity supply?

Name and describe the three kinds of product innovation.

Name and describe a marketing approach (that we discussed in class) that can be used to understand consumer behavior and/or estimate demand.

Name and describe a statistical approach (that we discussed in class) or technique that can be used to understand consumer behavior and/or estimate demand.

Name a psychological model (that we discussed in class) that can be used to understand consumer behavior and/or estimate demand.

Name and describe the six types of consumers.

How do fixed and variable costs differ in the short-run and long-run?

Jim is considering quitting his job and using his savings to start a small business. He expects that his costs will consist of a lease on the building, inventory, wages, electricity, and insurance.

11A. Identify which costs are explicit and which are opportunity (implicit) costs.

11B. Identify which costs are fixed and which are variable.

What is the law of diminishing returns? What are economies of scale and diseconomies of scale? Be sure to note the terms apply to the short run and the long run.

Application Questions

1. How can entrepreneurs shift elasticity of demand and elasticity of supply? Draw on the three determinants for each in your answer.

2. How can entrepreneurs be innovative in production for the short-term and the long-term? Draw on concepts like diminishing returns, diseconomies of scale, and economies of scale in your answer.

redfish597

Make sure you first review and understand all of the "shift factors" for the supply and demand curves in your textbook. I would have a list of these by my side as you read the article titled, "The Oil Conundrum." The later part of the article discusses some of the topics we will be learning about later this semester. You may also use the sort article, "Why Is Gas Still So Expensive in California?" Use both articles to identify how events discussed in the article are affecting supply AND demand for oil. Find three events that likely caused supply shifts and three events that likely caused demand for oil to shift. You will need to answer the following six times, three for demand and three for supply:

a. Event - Quote the article

b. Which determinant (shift factors), as discussed in chapter 3, are causing the supply or demand curve to shift given the event quoted?

c. Which direction will the curve shift.

d. Given the shift, what will happen to price, will it increase or decrease?

e. Given the shift, what will happen to quantity, will it increase or decrease?

Note that the terms IMF and GDP are the International Monetary Fund and Gross Domestic Product. The IMF is an international economic stability organization. GDP is a measure for the size of a country's economy.

Here's a hint where to find some examples in "The Oil Conundrum" article:

1st page, 1st and 2nd paragraph - Supply

2nd page, 4th paragraph - Supply

3rd page, 5th paragraph - Supply

4th page, 4th paragraph - Demand

6th page, 3rd paragraph - Demand

6th page, 4th paragraph - Demand

Section I: Supply & Demand Analysis (Chapter 3) In each of the following 10 questions, show what happens to the Demand, Supply, equilibrium price and equilibrium quantity of copper. Show an increase by use of +, a decrease with a -, and no change with 0 (thatâs a zero, not an O or o). Although in the real world, both supply and demand are constantly changing, in the model we are using here, only one curve shifts per problem. So, if demand goes + or -, supply will be 0, and vice versa. In no case will equilibrium price or equilibrium quantity be 0. You may want to sketch out the supply and demand curve analysis to help in answering the questions. You will also be required to identify which determinant (of demand or supply) has changed, thus causing the shift. Rather than actually writing in the determinant, fill in the blank with the number that corresponds to the relevant determinant, based upon the following list. You may want to refer to the lecture notes entitled Determinants of Demand & Supply in the COURSE CONTENTS section. For questions 1 - 10, refer back to this list. Some you may want to use more than once, some you won't use at all. Copy and paste this list to an MS Word document and then print it out if you don't want to keep scrolling back and forth between this list and the question you're trying to answer. Determinants of Demand: 1. Change in buyer tastes 2. Change in number of buyers 3. Change in income 4. Change in the prices of related goods (on the demand side) 5. Change in consumer expectations Determinants of Supply: 6. Change in resource prices 7. Change in technology 8. Changes in taxes and subsidies 9. Change in prices of related goods (on the supply side) 10. Change in producer expectations 11. Change in the number of suppliers. For example, if a rightward shift in the supply curve for an item were caused by an increase in the number of producers of that item, you would indicate this be entering 11 into the relevant blank. If the demand curve shifted to the left because people didn't like that item anymore (like mimeograph machines), you'd enter 1 into the blank. Q#1 President Trump signs into law a bill that says the U.S. government will subsidize the construction of new homes, office buildings, bridges, and other infrastructure projects requiring copper. Demand; Supply: Equilibrium Price: Equilibrium Quantity Exchanged; Which determinant changed?: Q#2 Non-capitalist economies around the world begin a phase of rapid economic development, construction and growth, becoming increasingly wealthy, as they begin to adopt more capitalist institutions, as in China, Russia, and the former communist countries of East Europe. Demand; Supply: Equilibrium Price: Equilibrium Quantity Exchanged: Which determinant changed?

ECON 1201 Lecture Notes - Lecture 7: Pricing Strategies, Price Discrimination, Monopolistic Competition

ECON 1201 Full Course Notes

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