Selected Readings

a.Determine the firm’s total cost function. b.What is the firm’s total cost of production at Q = 3?

SELECTED READINGS

Allen,R.G.D.Mathematical Analysis for Economists.New York:Macmillan,1938. ———.Mathematical Economics,2nd ed.New York:Macmillan,1976. Brennan,M.J.,and T.M.Carroll.Preface to Quantitative Economics & Econometrics,4th ed.

Cincinnati,OH:South-Western Publishing,1987. Chiang,A.Fundamental Methods of Mathematical Economics,3rd ed.New York:McGraw-

Hill,1984. Draper,J.E.,and J.S.Klingman.Mathematical Analysis:Business and Economic Applications, 2nd ed.New York:Harper & Row,1972. Fine,H.B.College Algebra.New York:Dover,1961. Glass,J.C.An Introduction to Mathematical Methods in Economics.New York:McGraw-Hill, 1980. Henderson,J.M.,and R.E.Quandt.Microeconomic Theory:A Mathematical Approach,3rd ed.New York:McGraw-Hill,1980. Marshall,A.Principles of Economics,8th ed.London:Macmillan,1920. Purcell,E.J.Calculus with Analytic Geometry,2nd ed.New York:Meredith,1972. Rosenlicht,M.Introduction to Analysis.Glenview,Ill:Scott,Foresman,1968. Silberberg,Eugene.The Structure of Economics:A Mathematical Analysis,2nd ed.New York:

McGraw-Hill,1990. Youse,B.K.Introduction to Real Analysis.Boston:Allyn & Bacon,1972.

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3

The Essentials of Demand and Supply

Managerial economics is the synthesis of microeconomic theory and quantitative methods to find optimal solutions to managerial decisionmaking problems.In Chapters 1 and 2 we reviewed the basic elements of two of the quantitative methods most frequently used in managerial economics:mathematical economics and econometrics.In this chapter,we will demonstrate how presumably quantifiable economic functional relationships involving one dependent variable and one or more explanatory variables may be used to predict market-clearing prices in idealized,perfectly competitive markets.

Students who have made it this far in their economic studies have already been exposed to the market paradigm of demand and supply.While the principles of demand and supply presented in this chapter may be familiar, the manner in which this material is presented may not be.The discussion that follows establishes the procedural framework for much of what is to come.

The basic market paradigm presented in this chapter is a stylized version of what occurs in the real world.The model is predicated on a number of assumptions that are rarely,if ever,satisfied in practice,including perfect and symmetric information,market transactions that are restricted to private goods and services,and that no market participants having market power.

When there is “perfect and symmetric information,”all that is knowable about the goods and services being transacted is known in equal measure by all market participants.For markets to operate efficiently,both the buyer and the seller must have complete and accurate information about the