Demand curve slope, Strategic Management

Why does the demand curve slope down?

Bridgette has an income of $480 which she uses to purchase only two goods:  CDs and mystery novels.  The price of a CD, PCD is $10, and the price of a mystery novel, PMN is $12.  Assume all indifference curves have the normal "bowed" shape.

a.   Draw Bridgette's budget constraint, putting mystery novels on the horizontal axis.  At her consumer optimum, she buys 30 CDs and 15 mystery novels.  Draw an indifference curve that leads to this choice.  What is her marginal rate of substitution (MRS) of CDs for mystery novels at this point?

b.   Now suppose that PCD rises to $15, PMN rises to $18, and Bridgette's income rises to $720.  How (if at all) will she adjust her consumption of CDs and mystery novels from part (a).

c.   Now return to the situation where PCD = $10, PMN = $12, and Income = $480.  For a membership fee of $120, Bridgette can join a discount shopping club and buy at the lower prices of PCD = $9 and PMN = $6.

Will Bridgette take this option?  Why or why not?  [Hint:  With the option, Bridgette's budget constraint will go through 30 CDs and 15 mystery novels, but it will not have the same slope as before.]

Posted Date: 2/25/2013 2:07:30 AM | Location : United States







Related Discussions:- Demand curve slope, Assignment Help, Ask Question on Demand curve slope, Get Answer, Expert's Help, Demand curve slope Discussions

Write discussion on Demand curve slope
Your posts are moderated
Related Questions
Discuss the following quotation and please provide examples. "Enterprise Architecture frameworks such as the Zachman Framework are essentially conceptual skeletons tha

Recognizing a Company's Strategy 1.   A company's strategy is reproduced in its actions in the marketplace & the statements of senior managers regarding the company's current b

# 14 Strategy formulation presupposes a set of goals and objectives. Why aren''t goals and objectives obvious? What characteristics of people and organizations can make setting goa

RF and JT are both former international rugby players who, when they retired, formed their own business, WFH Trading Company.  The company that they established at first manufactur

Q. Show the Activity based budgeting? Activity based budgeting (ABB) uses cost  'drivers'  for  different  support  resources consumed e.g. machining, quality control or admini

Integrated Marketing Communication (IMC ) and Marketing Channel strategy : Develop a promotional strategy addressing the advertising and sales promotion aspect of communic

Among NMS, we can find various scenes of the economic crisis, ranging from countries with extremely serious crisis to countries with rather milder crisis. These countries can be cl

1. Unions quite frequently oppose the time study because the accuracy of time study is overly dependent upon the skill and judgment of the time study man. The time

does this concept fit in under the evaluation of strategic options

Question 1: (a) Explain a framework for a company to manage its application portfolio. (b) Apply the application portfolio concept to show the different applications for a