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
Product innovation rates are a: a. A goal-based measure. b. A corporate goal. c. A productivity measure. d. An external factor.

An electronics firm is presently manufacturing an item that has a variable cost of $0.50 per unit and a selling price of $1.00 per unit.  Fixed costs are$14,000 per month.  present

Q. Explain about Position ratio - working capital ratio? 1 Current ratio (CA) or working capital ratio CA = Current assets / Current liabilities       (times) The current

Samsung multibusiness strategy

Instant competition blinds a company to latent competitors who can demolish the old ways of doing business.

1.Middle managers are often at the center of efforts to develop tactical plans to implement established strategies. How are tactical plans typically established? What challenges co

# 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

I have one real option problem I need help with

apply a five forces analysis how would you describe Genentech competitive position

Question 1: (i) Why should stategic issues involve all stakeholders for a product or/and service? (ii) What are the objectives of strategic formulation and implementation