Economics for Managers

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Farnham

 Economics for Managers  Third edition

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P  aul G. Farnham

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Economics for Managers, Global Edition Table of Contents Cover Title Copyright Contents Preface About the Author Part 1 Microeconomic Analysis Chapter 1 Managers and Economics CASE FOR ANALYSIS: Micro- and Macroeconomic Influences on the Global Automobile Industry Two Perspectives: Microeconomics and Macroeconomics Microeconomic Influences on Managers Markets

Managerial Rule of Thumb: Microeconomic Influences on Managers Macroeconomic Influences on Managers Factors Affecting Macro Spending Behavior Managerial Rule of Thumb: Macroeconomic Influences on Managers Summary Key Terms Exercises Application Questions

Chapter 2 Demand, Suply, and Equilibrium Prices CASE FOR ANALYSIS: Demand and Supply in the Copper Industry Demand Nonprice Factors Influencing Demand Demand Function Demand Curves Change in Quantity Demanded and Change in Demand Individual Versus Market Demand Curves Linear Demand Functions and Curves Mathematical Example of a Demand Function

Managerial Rule of Thumb: Demand

Table of Contents Considerations Supply Nonprice Factors Influencing Supply Supply Function Supply Curves Change in Quantity Supplied and Change in Supply Mathematical Example of a Supply Function

Summary of Demand and Supply Factors Managerial Rule of Thumb: Supply Considerations Demand, Supply, and Equilibrium Definition of Equilibrium Price and Equilibrium Quantity Lower-Than-Equilibrium Prices Higher-Than-Equilibrium Prices Mathematical Example of Equilibrium Changes in Equilibrium Prices and Quantities Mathematical Example of an Equilibrium Change

Summary Key Terms Exercises Application Questions

Chapter 3 Demand Elasticities CASE FOR ANALYSIS: Demand Elasticity and Procter & Gamble’s Pricing Strategies Demand Elasticity Price Elasticity of Demand The Influence of Price Elasticity on Managerial Decision Making Price Elasticity Values Elasticity and Total Revenue

Managerial Rule of Thumb: Estimating Price Elasticity Determinants of Price Elasticity of Demand Number of Substitute Goods Percent of Consumer’s Income Spent on the Product Time Period

Numerical Example of Elasticity, Prices, and Revenues Calculating Price Elasticities

Table of Contents Numerical Example The Demand Function Other Functions Related to Demand Calculation of Arc and Point Price Elasticities Price Elasticity Versus Slope of the Demand Curve Demand Elasticity, Marginal Revenue, and Total Revenue

Vertical and Horizontal Demand Curves Vertical Demand Curves Horizontal Demand Curves

Income and Cross-Price Elasticities of Demand Income Elasticity of Demand Managerial Rule of Thumb: Calculating Income Elasticity Cross-Price Elasticity of Demand

Elasticity Estimates: Economics Literature Elasticity and Chicken and Agricultural/Food Products Elasticity and Beer Water Demand Elasticity and the Tobacco Industry Elasticity and Health Care Tuition Elasticity in Higher Education

Managerial Rule of Thumb: Price Elasticity Decision Making Elasticity Issues: Marketing Literature Marketing Study I: Tellis (1988) Marketing Study II: Sethuraman and Tellis (1991) Marketing Study III: Hoch et al. (1995) Marketing Study Update

Managerial Rule of Thumb: Elasticities in Marketing and Decision Making Summary Appendix 3A Economic Model of Consumer Choice Key Terms Exercises Application Questions

Table of Contents Chapter 4 Techniques for Understanding Consumer Demand and Behavior CASE FOR ANALYSIS: The Use of New Technology to Understand and Impact Consumer Behavior Understanding Consumer Demand and Behavior: Marketing Approaches Expert Opinion Consumer Surveys Test Marketing and Price Experiments Analysis of Census and Other Historical Data Unconventional Methods Evaluating the Methods

Managerial Rule of Thumb: Marketing Methods for Analyzing Consumer Behavior Consumer Demand and Behavior: Economic Approaches Relationship Between One Dependent and One Independent Variable: Simple Regression Analysis Relationship Between One Dependent and Multiple Independent Variables: Multiple Regression Analysis Other Functional Forms Demand Estimation Issues

Managerial Rule of Thumb: Using Multiple Regression Analysis Case Study of Statistical Estimation of Automobile Demand

Managerial Rule of Thumb: Using Empirical Consumer Demand Studies Relationships Between Consumer Market Data and Econometric Demand Studies Case Study I: Carnation Coffee-mate Case Study II: Carnation Evaporated Milk Case Study III: The Demand for Cheese in the United States

Managerial Rule of Thumb: Using Consumer Market Data Summary Key Terms Exercises Application Questions

Chapter 5 Production and Cost Analysis in the Short Run CASE FOR ANALYSIS: Production and Cost Analysis in the Fast-Food Industry

Table of Contents Defining the Production Function The Production Function Fixed Inputs Versus Variable Inputs Short-Run Versus Long-Run Production Functions Managerial Rule of Thumb: Short-Run Production and Long-Run Planning Productivity and the Fast-Food Industry Model of a Short-Run Production Function Total Product Average Product and Marginal Product Relationships Among Total, Average, and Marginal Product Economic Explanation of the Short-Run Production Function

Real-World Firm and Industry Productivity Issues Other Examples of Diminishing Returns Productivity and the Agriculture Industry Productivity and the Automobile Industry Productivity Changes Across Industries

Model of Short-Run Cost Functions Measuring Opportunity Cost: Explicit Versus Implicit Costs Accounting Profit Measures Versus Economic Profit Measures Managerial Rule of Thumb: The Importance of Opportunity Costs Definition of Short-Run Cost Functions Fixed Costs Versus Variable Costs Relationships Among Total, Average, and Marginal Costs Relationship Between Short-Run Production and Cost Other Short-Run Production and Cost Functions

Managerial Rule of Thumb: Understanding Your Costs Empirical Evidence on the Shapes of Short-Run Cost Functions Econometric Estimation of Cost Functions

Table of Contents Survey Results on Cost Functions Constant Versus Rising Marginal Cost Curves Implications for Managers

Summary Key Terms Exercises Application Questions

Chapter 6 Production and Cost Analysis in the Long Run CASE FOR ANALYSIS: The iPhone in China Model of a Long-Run Production Function Input Substitution

Model of a Long-Run Cost Function Derivation of the Long-Run Average Cost Curve Economies and Diseconomies of Scale Factors Creating Economies and Diseconomies of Scale Other Factors Influencing the Long-Run Average Cost Curve The Minimum Efficient Scale of Operation Long-Run Average Cost and Managerial Decision Making

Summary Appendix 6A Isoquant Analysis Key Terms Exercises Application Questions

Chapter 7 Market Structure: Perfect Competition CASE FOR ANALYSIS: Competition and Cooperative Behavior in the Potato Industry The Model of Perfect Competition Characteristics of the Model of Perfect Competition Model of the Industry or Market and the Firm The Short Run in Perfect Competition Long-Run Adjustment in Perfect Competition: Entry and Exit Adjustment in the Potato Industry Long-Run Adjustment in Perfect Competition: The Optimal Scale of Production

Managerial Rule of Thumb: Competition Means Little Control Over

Table of Contents Price Other Illustrations of Competitive Markets Competition and the Agricultural Industry Competition and the Broiler Chicken Industry Competition and the Red-Meat Industry Competition and the Milk Industry Competition and the Trucking Industry

Managerial Rule of Thumb: Adopting Strategies to Gain Market Power in Competitive Industries Summary Appendix 7A Industry Supply Key Terms Exercises Application Questions

Chapter 8 Market Structure: Monopoly and Monopolistic Competition CASE FOR ANALYSIS: Changing Market Power for Eastman Kodak Co. Firms with Market Power The Monopoly Model Comparing Monopoly and Perfect Competition Sources of Market Power: Barriers to Entry Managerial Rule of Thumb: Using Lock-In as a Competitive Strategy Changes in Market Power Measures of Market Power Antitrust Issues

Managerial Rule of Thumb: Understanding Antitrust Laws Monopolistic Competition Characteristics of Monopolistic Competition Short-Run and Long-Run Models of Monopolistic Competition Examples of Monopolistically Competitive Behavior

Managerial Rule of Thumb: Maintaining Market Power in Monopolistic Competition Summary Key Terms

Table of Contents Exercises Application Questions

Chapter 9 Market Structure: Oligopoly CASE FOR ANALYSIS: Oligopoly Behavior in the Airline Industry Case Studies of Oligopoly Behavior The Airline Industry The Soft Drink Industry The Doughnut Industry The Parcel and Express Delivery Industry

Oligopoly Models Noncooperative Oligopoly Models The Kinked Demand Curve Model Game Theory Models Strategic Entry Deterrence Predatory Pricing

Cooperative Oligopoly Models Cartels Tacit Collusion

Managerial Rule of Thumb: Coordinated Actions Summary Key Terms Exercises Application Questions

Chapter 10 Pricing Strategies for the Firm CASE FOR ANALYSIS: Airline Pricing Strategies: Will They Start Charging for the Use of the Lavatories? The Role of Markup Pricing Marginal Revenue and the Price Elasticity of Demand The Profit-Maximizing Rule Profit Maximization and Markup Pricing Business Pricing Strategies and Profit Maximization Markup Pricing Examples

Managerial Rule of Thumb: Markup Pricing Price Discrimination Definition of Price Discrimination Theoretical Models of Price Discrimination

Table of Contents Price Discrimination and Managerial Decision Making Marketing and Price Discrimination

Macroeconomics and Pricing Policies Summary Key Terms Exercises Application Questions

Part 2 Macroeconomic Analysis Chapter 11 Measuring Macroeconomic Activity CASE FOR ANALYSIS: Measuring Changes in Macroeconomic Activity: Implications for Managers Measuring Gross Domestic Product (GDP) The Circular Flow in a Mixed, Open Economy Managerial Rule of Thumb: Spending Patterns National Income Accounting Systems Characteristics of GDP Real Versus Nominal GDP Alternative Measures of GDP

Other Important Macroeconomic Variables Price Level Measures Measures of Employment and Unemployment

Managerial Rule of Thumb: Price Level and Unemployment Major Macroeconomic Policy Issues What Factors Influence the Spending Behavior of the Different Sectors of the Economy? How Do Behavior Changes in These Sectors Influence the Level of Output and Income in the Economy? Can Policy Makers Maintain Stable Prices, Full Employment, and Adequate Economic Growth over Time? How Do Fiscal, Monetary, and Balance of Payments Policies Influence the Economy? What Impact Do These Macro Changes Have on Different Firms and Industries?

Managerial Rule of Thumb: Competitive Strategies and the Macro Environment Summary Key Terms

Table of Contents Exercises Application Questions

Chapter 12 Spending by Individuals, Firms, and Governments on Real Goods and Services CASE FOR ANALYSIS: Mixed Signals on the U.S. Economy in Summer 2012 Framework for Macroeconomic Analysis Focus on the Short Run Analysis in Real Versus Nominal Terms Treatment of the Foreign Sector Outline for Macroeconomic Analysis

The Components of Aggregate Expenditure Personal Consumption Expenditure Gross Private Domestic Investment Expenditure Government Expenditure Net Export Expenditure

Aggregate Expenditure and Equilibrium Income and Output Aggregate Expenditure Equilibrium Level of Income and Output

Effect of the Interest Rate on Aggregate Expenditures Summary Appendix 12A Numerical Example of Equilibrium and the Multiplier Appendix 12B Algebraic Derivation of the Aggregate Expenditure Function Key Terms Exercises Application Questions

Chapter 13 The Role of Money in the Macro Economy CASE FOR ANALYSIS: The Chairman’s Quandary Money and the U.S. Financial System Definition of Money Measures of the Money Supply Depository Institutions and the Fractional Reserve Banking System The Central Bank (Federal Reserve) Tools of Monetary Policy

Managerial Rule of Thumb: Federal Reserve Policy Equilibrium in the Money Market The Supply of Money The Demand for Money

Table of Contents Equilibrium in the Money Market Change in the Supply of Money Change in the Demand for Money Overall Money Market Changes

Summary Appendix 13A Monetary Tools and the Market for Bank Reserves Key Terms Exercises Application Questions

Chapter 14 The Aggregate Model of the Macro Economy CASE FOR ANALYSIS: What Role for Inflation? The Model of Aggregate Demand and Supply The Aggregate Demand Curve Fiscal and Monetary Policy Implementation The Aggregate Supply Curve Using the Aggregate Model to Explain Changes in the Economy from 2007 to 2008 and from 2011 to 2012 Impact of Macro Changes on Managerial Decisions Measuring Changes in Aggregate Demand and Supply

Managerial Rule of Thumb: Judging Trends in Economic Indicators Summary Appendix 14A Specific and General Equations for the Aggregate Macro Model Key Terms Exercises Application Questions

Chapter 15 International and Balance of Payments Isues in the Macro Economy CASE FOR ANALYSIS: Uncertainty in the World Economy in 2012 Exchange Rates Managerial Rule of Thumb: Currency Exchange Rates Equilibrium in the Open Economy U.S. International Transactions in 2011 (Balance of Payments) The Current Account The Financial Account

Table of Contents Revenue or T-Account

Deriving the Foreign Exchange Market The Demand for and Supply of Dollars in the Foreign Exchange Market Equilibrium in the Foreign Exchange Market Managerial Rule of Thumb: The Foreign Exchange Market Exchange Rate Systems Flexible Exchange Rate System Fixed Exchange Rate System The Effect on the Money Supply Sterilization

Policy Examples of International Economic Issues The U.S. Economy, 1995–2000 The U.S. Economy, 2007–2008 and 2010–2012 Effects of the Euro in the Macroeconomic Environment Euro Macro Environment Effects on Managerial Decisions Southeast Asia: An Attempt to Maintain Fixed Exchange Rates Macro and Managerial Impact of the Chinese Yuan Since 2003 Policy Effectiveness with Different Exchange Rate Regimes

Summary Appendix 15A Specific and General Equations for the Balance of Payments Key Terms Exercises Application Questions

Part 3 Integration of the Frameworks Chapter 16 Combining Micro and Macro Analysis for Managerial Decision Making CASE FOR ANALYSIS: Strong Headwinds for McDonald’s Microeconomic and Macroeconomic Influences on McDonald’s and the Fast-Food Industry Shifting Product Demand Oligopolistic Behavior Strategies to Offset Shifting Demand Cost-Cutting Strategies Innovations for Different Tastes Drawing on Previous Experience

Table of Contents 2012 and Beyond: A Focus on China and Other Emerging Markets Economic and Political Issues Responses of Other Fast-Food Competitors Calorie Counts on Menus Macroeconomic Influences on the Fast-Food Industry in 2011 and 2012 Summary: Macro and Micro Influences on the Fast-Food Industry Appendix 16A Statistical Estimation of Demand Curves Exercises Application Questions

Solutions to Even-Numbered Problems Glossary Index A B C D E F G H I J K L M N O P Q R S T U V

Table of Contents W X Y Z