Answer the following questions based on Brickley, J. et al. “Managerial Economics and Organizational Architecture”, 7th edition. You must paraphrase as much as possible. The use of direct quotations must be avoided as much as possible. Any direct quotations must be in quotation marks, with the page number(s) specified.No external sources are allowed. The use of external sources will result in a grade of "zero".
Your homework will be graded based on correctness, accuracy and depth of your responses. You must answer the questions correctly and demonstrate your knowledge and understanding of the assigned course material. You must answer the qualitative questions in as much detail as possible, referring to as many relevant terms, concepts and theories as possible. Your explanations and analysis must be accurate, detailed and comprehensive.
You must show all your work for quantitative questions and problems. If you do not show your work, you will not receive full credit for answering the question.
Your homework responses cannot be re-worked after they have been graded.
The homework is worth 100 points total. All questions have equal importance (weight).
1. Carefully explain the difference between "a change in demand" and "a change in quantity demanded". What factors can cause a change in demand? What factors can cause a change in quantity demanded?
2. Carefully explain the difference between the "law of demand" and the "price elasticity of demand". Which information does the price elasticity of demand reveal that the law of demand does not reveal?
3. If the demand for a product is inelastic, what will happen to total revenue if price is decreased? Explain this carefully. Provide your own numerical example to illustrate your answer. (Please note that this question is NOT about "perfectly inelastic" demand. The question is about "inelastic" demand.)
4. Carefully define "marginal revenue". Provide your own numerical example to illustrate your definition. Carefully explain why marginal revenue is less than price when the demand curve slopes downwards.
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