Week 5: Supply & Demand, Patent Wars & Negotiations

Stanford GSB Sloan Study Notes, Week 5, Summer quarter

Pages assigned for reading: 339

MGTECON209 – Statistics & Economics (prof Oyer)

  • 4/5 cars sold in China in 2011 were to first time buyers.
  • Economists generally study people’s wants, rather than needs.
    • For added confusion, in wealthy countries calling something a “need” is often a value judgement.
  • Talk is cheap because supply exceeds demand 🙂
  • 800(!) occupations in US require a licence issued by local/state/federal government – thus meddling with supply.
    • In 1950s <5% of workforce, >29% in 2008
    • 40% of workers with post-college education also need a licence to work in their field
  • Price sensitivity is a concept, elasticity a mathematical term expressing it
  • Simplifying the elasticity formula
    • (% change in quantity / % change in price) = (change in Q / Q) / (change in P / P) = Slope of Demand/Supply function * (P/Q)
    • important that plugging the slope only works if the graph was drawn the “right” (e.g the unintuitive economist way) where quantity = X axis
  • Elasticity is negative over a products own price, yet positive over direct substitute’s price
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