Chapter 2: Supply and Demand: You Have What Consumers Want

Introduction

How This Book Is Organized

I grouped topics together by dividing this book into five parts. I hope that grouping topics together helps you more easily find related ideas. The following section gives you an idea of the concepts I present in each part.

Part I: The Nature of Managerial Economics

I hope that you associate managerial economics with the famous Broadway play, How to Succeed in Business Without Really Trying. The purpose of managerial economics is to give you ideas on how to increase your business’s profit. That’s success. Part I introduces fundamental aspects of managerial economics. It also introduces the basic theory of price determination — supply and demand. Finally, this part includes a brief calculus review if you’re interested in incorporating calculus with business decision-making. But, remember that you can read and understand every economic theory in the book without knowing calculus, so the calculus review is an easy chapter to skip if you want.

Part II: Considering Which Side You’re On in the Decision-Making Process

A common lament goes, “Whose side are you on?” As the lament recognizes, it really matters to note which side you’re on. This part separates consumers from producers to look more closely at each side of a market.

I begin by examining in-depth the relationship between price and quantity demanded. I examine why consumers are willing to purchase more at lower prices and that relationship’s implication for business decisions, including how business owners can influence that relationship.

On the other side of the market, producers want high prices, so the relationships between inputs and output and production costs and supply are developed. And because innovation affects these relationships, the development of new technology is explored.