Managerial Economics and Strategy, 2/e

2 Supply and Demand

Talk is cheap because supply exceeds demand.

Learning Objectives

1. Determine a good’s market price and quantity using supply and demand curves.

2. Predict how an event that affects consumers or firms changes the market price and quantity.

3. Analyze the market effects of government policy using the supply-and-demand model.

4. Determine for which markets the supply-and-demand model is appropriate.

Managerial Problem Carbon Taxes

Burning fossil fuels such as gasoline, coal, and heating oil releases gases containing carbon into the air.1 These “greenhouse” gases are widely believed to contribute to global warming. To reduce this problem and raise tax revenues, many environmentalists and political leaders have proposed levying a carbon ...