Essay about Managerial Economics

The law of supply and demand is an economic theory that explains how supply and demand are related to each other and how the relationship affects the price of goods and services. It's a basic economic principle that states that when there is an oversupply of a good or service, prices fall. When there is high demand, prices tend to rise. (Investopedia, 2015)

2. Total revenue falls as the price of a good is raised, if the demand for the good is ( )

Law of Supply: Price and quantity has a direct relation, when price increases, quantity also increases. When the price of oranges increases, farmers

____ 16. If two goods are ____, then an increase in the price of one leads to ____ in the quantity demanded of the

It is basic economic principle that states that when there is an oversupply of a good or service, prices fall. When there is a high demand, prices tend to rise.

The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the

____11.Refer to Table 4-1. If these are the only four buyers in the market, then when the price increases from $1.00 to $1.50, the market quantity demanded

1) I thought that the price of a good changed from the quantity that was available. Would you explain why it is the opposite?

The efficient markets theory, according to NASDAQ (n.d.) is the, “Principle that all assets are correctly priced by the market, and that there are no bargains,” (para. 1). This theory implies that supply and demand dictate the reasonable market value for products. Without high demand, the supply will be greater and prices will be lower. Respectively, as demand increases so do the prices until the supply and demand are at equilibrium.

At point A, the price of a coke is RM2.00 and the quantity demanded for it is 12,000. However at point C, when the price of the coke increased to RM6, the quantity demanded for the coke decreased 3 quarters compared with point A. When the price of the coke increased to RM8, there was no demand of coke in the economy. The price of the products affects the quantity demanded in the economy. As the price increase, quantity demanded in the economy declines and as the price decreases, quantity demanded for the product will increases.

Understanding the fundamental concepts of economics allows us to analyze laws that have a direct bearing on the economy. These laws and theories are essentially the backbone of how economics is used and studied. The law of demand can be expressed by stating that as long as all other factors remain constant, as prices rise, the quantity of demand for that product falls. Conversely, as the price falls, the quantity of demand for that product rises (Colander, 2006, p 91). Price is the tool used that controls how much consumers want based on how much they demand. At any given price a certain quantity of a product is demanded by consumers. As the price decreases, the quantity of the products demanded will increase. This indicates that more individuals demand the good or service as the price is lowered. This can be illustrated using the demand curve. The demand curve is a downward sloping line that illustrates the inversely related relationship of price and quantity demanded.

The relationship between the price of a product and the quantity supplied, holding all other things constant is generally sloping upwards. Supply is represented by the entire curve and not just one point on the curve. When the price of the product changes, the quantity supplied changes, but supply does not change. When cost of production changes, supply will change, and the entire supply curve will shift. Market Supply is the summation of all the individual supply curves. In general, the more firms producing a product, the greater the market supply. When quantity supplied at a given price decreases, this is generally caused by an increase in the cost of production or decrease in the number of sellers. An increase in wages, cost of raw materials, cost of capital, can also decrease supply. Weather may also affect supply, if the raw materials are perishable or unattainable due to transportation problems.

Suppose a second firm enters the market. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is now given by

there are three customers in the market and their individual demand functions are listed below:

Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.