Subject category:
Case Method and Specialist Management Disciplines
Published by:
Harvard Business Publishing
Version: 23 June 1993
Length: 12 pages
Topics:
Economic analysis; Pricing
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.
About
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.