COMMERCE 2MA3 Chapter 11: Marketing - Chapter 11

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 2MA3
• Professor: Ali Abdul Hussein

Document Summary

Income effect: if consumers income changes, they may demand more/less of the product: substitution effect: price elasticity is higher when there are cheaper alternatives available. Cross-price elasticity: demand changes if the price of complementary product changes (demand increase if prices drop) ex. Price of fries drop, demand for ketchup increases. When the prices for substitute prices increase, demand for the alternative will increase. Price of chips increase, demand for candy increase: costs: a firm must be cost-effective. Customers are only concerned about the final selling price and the benefits they receive, not relative to how much it covers the company"s costs: there are two types of costs contributing to total costs (=fixed costs + Total variable costs): fixed costs: costs that remain at the same level regardless of any changes in the volume of production. Salaries: variable costs: costs that are primarily labor and materials, that may vary depending on the volume of production.