Jay Ann I.

Salendrez

MBA Student

Subject: Managerial Economics

1. All firms producing a particular good constitute an industry engaged in the production of

that good. For example, cars are manufactured by three companies. Demand for a specific kind of

car is a firm’s (Company) demand while as demand for all kinds of cars is industry’s demand.

Another example is refrigerator which is a firm’s demand while that for all brands of refrigerators is

the industry’s demand. This distinction is very important because while there are close substitutes

for firm’s (company) products, no such close substitutes exists for industry’s product. A Firm’s

demand is fairly elastic. If there is product differentiation among the firms, then the demand curve

for the individual firm will be downward slopes.

Industry’s demand curve as a whole is downward sloping indicating an inverse price

quantity relationship. A business economist or a business manager has to see the share of firm

demand in the industry demand. For undertaking sales forecasting, therefore, it is essential to

project industry demand first and then give projection.

2. Short run demand has a quantity of labor which is variable but the quantity of capital

and production processes are fixed while the long run demand has a quantity of labor, capital, and

production processes are all variable or changeable.

Most businesses used these distinction to compete between the firms to make decisions

not only about how many workers to employ at any given point to put together and what

production processes to use. Even taking various labor laws as a given, it's usually easier to hire

and fire workers than it is to significantly change a major production process or move to a new

factory or office.
3. Decisions made by managers are crucial to the success or failure of a business. Roles

played by business managers are becoming increasingly more challenging as complexity in the

business world grows.

It is very important for managers to understand the supply schedule and demand

schedule because while taking decisions in an organization, managers need to know about the

price controls in the market, supply and demand for the product in market, interdependence and

the grains from trade, the relationship between price and quantity demand consumer surplus,

product surplus, market efficiency and analyzing changes in equilibrium.

4. Elasticity of Demand = New Qty-Old Qty/Old Qty

New Price-Old Price/Old Price

= 161-20/20
7.50-6/6

= -.20
.25

= -.80

 Anselmo’s demand is inelastic. His elasticity of demand is less than 1 therefore it is

relatively inelastic which states that a change in price leads to a smaller percentage

change in quantity demanded.

5. Elasticity of Demand= = New Qty-Old Qty/Old Qty

New Price-Old Price/Old Price

0.18 = (x-8)/8
(2-3)/3

0.18 = (x-8)/8
(2-3)/3

0.18 = x-8/8 x -3

0.18 = -3x + 24
 8
-3x + 24 = 0.18(8)

-3x = 0.18 (8) -24

X= 0.18 (8) -24

-3

= 7.52

ΔQs / Qs
6. Elasticity of Suppl y = ------------
ΔP/ P

105-75/75
= ------------
10-9/9

0 .4
= ------------
0.11

= 3.64