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Reference no. 9-191-093
Authors: Anirudh Dhebar
Published by: Harvard Business Publishing
Originally published in: 1990
Version: 23 June 1993
Length: 12 pages

Abstract

Examines the important economic considerations affecting a firm''s price- quantity decision for a product. Begins with a discussion of the appropriate decision criterion. Next, it motivates the concept of a demand curve for a product and defines demand elasticity. Marginal analysis is used to establish the following necessary condition for optimal price and quantity: marginal revenue must equal marginal cost. Price-quantity determination in the presence of a resource constraint and competition is also discussed.

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Abstract

Examines the important economic considerations affecting a firm''s price- quantity decision for a product. Begins with a discussion of the appropriate decision criterion. Next, it motivates the concept of a demand curve for a product and defines demand elasticity. Marginal analysis is used to establish the following necessary condition for optimal price and quantity: marginal revenue must equal marginal cost. Price-quantity determination in the presence of a resource constraint and competition is also discussed.

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