managerial economics - dr.ehab nadem part ii
TRANSCRIPT
7/30/2019 Managerial Economics - Dr.ehab Nadem Part II
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Prepared By
Khalid Omar
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Market
Definition: Market It’s a Place (Mechanism or Media or
System) where buyer & seller Meet (Interact)
to Exchange goods and services
When we say Market we means that, two said of themarket (Demand & Supply) because we can’t use one
said only to speck about market
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General Rule :
When Demand is increase the price will increase that
assumed the other facts are constant.
Exception :
Sometime if demand are increase the price may be not
increase because the supply also increase by the same
percentage. Also if supply increased by lees than theDemand the price will increase & if supply increase more
than the demand the price will go down.
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M A R K E T
All countries work with Economic system, will give us
Market price
MARKET
Demand Supply
Market Price
Decision
Producer Consumer
Official Price
Privet
Agency
Gov.
Ceiling price
Subsidies price Value of product
Goods & Services
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Market
D S
Factors Effect Demand Factors Effect Supply
Demand FunctionSupply Function
D x = f ( Px Y , T . PR )
Product x
Price of x
( - )
The relationship
between Demand &
price is negative
Short - Run
immediate Effect
Now
Long – Run
Not Immediate
Effect
Consumer
Income
Test
Consumer preference
Price of
related goods
Complementary
goods
Substituted or
Competitive goods
Sx = f ( …….. ………)
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General Rules :
Law of Demand “When price increase Quantity demand Decrease
, with other factors Constant.”
Close Substituted like Pepsi & Cooce
Substituted only like coffee & tea or Pepsi & Seven
Complementary Goods are the products that Complete satisfaction
from the main product
( like Sugar & Tea or Camera & Memory cards )
As long as the complementary product is available and ship will
effect to increase demand of main product
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While The substituted product price increase the demand of
main product is increase .
Although When consumer income increase ( as long Run
Effect ) the demand will increase for normal goods but demand
will decrease from inferior goods ( like Foul& Flafl)
Market Force to go at Market price,
When we say market we mean Demand & Supply
Law of Demand:
{When price is Increase, Quantity of Demand will decrease}
Vise versa
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● When we ask about the effect of any factor we need to know two
things Time ( Ether short – run or long run effect) & direction
( Decrease or Increase )
Supply Function:
Sx = f ( Px ) ……………………………………………….
Short – Run
Immediate
Law of supply:- When price is increase the
Quantity of supply will increase ( positiverelationship ) & vise versa ( Other factor are
constant.
Long – run
Cost of production , Gov. polices , technology
R/M, Labor, Utility
Government polices:-
1- Fiscal polices. Tax, Gov. Disbursement
2- Monetary polices. Interest Rat, Credit System
3- Regulation polices. Investment law License,
Technology :- Labor Intensive Or capital Intensive
When we shifted from labor intensive to capital
intensive the supply will increase.
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If Government increase supply it will reflect on:
-Price decrease
- Tax collection Increase.
- Job Opportunity Increase.- Export increase.
Test Question sample :
Q: Demand is relationship between consumer demand and Cost of production.
A: False , Demand function is a relation between demand and Px / Y,T,PR
While cost of production is one of component of supply function is
Sx = f ( Px ) / Cost , Gov., Tech.
Q : Consumer income and price of production both they effect consumer decision in the
same way.
A: False : If Consumer income increase Demand will increase at long – run while price of
production increase demand will decrease,
s
c
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Question :- There is no difference between demand & Quantity of demand ?
Answer : False - Increasing in Quantity Demand is short run effect related to
increase of the price the shifting will be at the same curve but increasing in
demand it self will be as reflection of anther facet like Customer income , Test or
PR .
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3- Differentiate between Demand Function Or Supply Function and law of Demand or
Law of Supply ?
Dx = f ( Px ) Y, T , PR
S
C
Q
P
P1
Q1
D
P2
Q2
When price Decrease
Quantity Demand
Increase
Law of Demand
Movement in the
same curve
P1
Q1 Q2
Shifting the curve related to change in
demand as reflection of changes of any
other factor beyond the price like
Customer income , test Or price of
related product.
Q
P
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Sx = f ( Px ) Product Cost , Gov. polices , Technology
Q1
P1
P2
Q2
S
Q
P
Q
P
P1
Q1 Q2
S S
Change Quantity Supply at the same
curve related to Change of the price
Change Supply by shifting the curve
related to Change of other fact like ( Cost
,Gov. ) not change in price
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S 1
D 1
P
P e
Demand and supply curves will intersect at the
point called (Market equliprem price )
S 2
D 2
P e
Q1 Q2Q3
P e
Q4
Note: Any shifting for Supply curve or demandcurve will be there is new equliprem price .
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S 1
D 1
P
P e 40 $
S 2
Ceiling or Max.
Price 10 $
Q1Q2
Shortage in supply – Black Market Until the supplycurve shift to right ( increase Q. Supply ) and the
new Equliprem point will achieve.
Equliprem price Short Run – This price it can be not the optimum price or best price .
If we need to change price we have to shift the curve by reducing cost of production or
reduce the demand by give substitute.
Q
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The government can Interfere in the market price for basic products by
two tools:
1- Fixing ceiling price for short run only .
2- Increase supply by reducing Cost of production or change from
labor intensive to technology Intensive.
DD
S 1
S 1
S 2
S 2
P e 1
P e 2 P e 1
P e 2
Q2
Q2Q2Q1 Q1
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D 2 D 2
D 1
D 1S S
Government can interfere to increase demand or reduce demand .
PP
P e 1
P e 1P e 2
P e 2
Q1Q1
Q2Q2