Lecture Managerial economics (8e): Chapter 3 - Samuelson, Marks

Chapter 3 - Demand analysis and optimal pricing. In chapter 2, we presented a simple model of profit maximization. There the manager began with demand and cost functions and used them to determine the profit-maximizing price and output level for a given product or service. In this chapter, we will take a closer look at demand and the role it plays in managerial decision making.

Managerial Economics, 8e William F. Samuelson   Stephen G. Marks ●

Chapter Three

Demand Analysis and  Optimal Pricing

 There’s no brand loyalty so strong  that the offer of “penny off” can’t 

overcome it.

For Discussion

Airline Ticket Pricing

Anyone who has traveled via commercial airline, even on 

an infrequent basis, knows there is a bewildering plethora 

of fares for the same route.

Determinants 

of Demand

The Demand Function

The Demand Curve and Shifting Demand

General Determinants of Demand

Figure 3.1

A Shift in Demand

Elasticity of Demand

Price Elasticity

Factors Affecting Price Elasticity Other Elasticities

Cross­Price Elasticities Price Elasticity and Prediction

Figure 3.2

extreme cases

Demand analysis and Optimal Pricing

Price Elasticity, Revenue, and 

Marginal Revenue

Maximizing Revenue

Figure 3.3

Demand, Revenue, 

and Marginal Revenue

Demand analysis and Optimal Pricing

Optimal Markup Pricing

Business Behavior—Pricing in Practice

Demand analysis and Optimal Pricing

Price Discrimination

Multinational Production and Pricing Revisited

Demand­Based Pricing Forms of Price Discrimination Information Goods

Customized Pricing and Products

The Economics of Groupon

Airline Ticket Pricing Revisited

Appendix to chapter 3

Consumer Preferences and Demand

The Consumer’s Problem

Indifference Curves The Budget Constraint Optimal Consumption Demand Curves

Figure 3A.1

A Consumer’s 

Indifference 

Curves

Figure 3A.2

The Consumer’s Budget Line

Figure 3A.3

The Consumer’s Optimal

consumption Bundle

Figure 3A.4

The Price­Consumption curve