# Essay on Econ Final

Submitted By malaikasmith
Words: 8101
Pages: 33

Malaika Smith
Managerial Economics July 2013
Final Exam

* Managerial economics offers managers the collective wisdom of the economics profession. How useful and applicable are the Seven Rules (discussed on the slides during the second lecture)? Specifically, critique/discuss each of the seven rules and apply them to the success of your firm. And more specifically, how would you use the rules to estimate the key variables: Elasticity of demand, markup, MC and MR? Finally, are there other lessons/suggestions from the textbook that you feel are viable, or, perhaps nonsensical?
The Rule #1: Know Your Market
Apple Inc. needs to know their market. If they do not know their market they cannot make good or sound business decisions. Apple needs to know their elasticity of demand for their products and understand if all their goods possess the same elasticity or if some segments within the market allow them to price certain goods at a certain point and others at another. After researching one of Apple Inc. products I was able to determine the costs of the Ipad a defining product for the Apple Inc. According to an article on bloomberg.com, the costs of creating a 16, 32, and 64 gigabyte iPad are \$260, \$289, and \$348 respectively. Their selling point of these three iPads are \$499 for the 16 gig, \$599 for the 32 gig, and \$699 for the 64 gig. Using a formula different than the change of quantity demanded/change in price, the calculated these elasticity’s through the incorporation of marginal revenue and price and concluded that the 16 gig iPad has an elasticity of demand of -2.09, the 32 has a -1.93, and the 64 has a -1.99.
As you examine this data you can find these three products to have a very close elasticity. The items demand is considered relatively elastic. Meaning that if Apple were to change prices from current levels, the percentage change in quantity demanded would exceed the percentage change in price. People may not purchase the items if the price were to change.