Lecture Notes: Decision Making in Markets

Lecturer: Ms. Rachel Erde

Course: COMM1100 Business Decision Making

Key Logistics:

• Mute microphones during online classes.
• Use Slido for questions.
• Lectures are recorded and available on Moodle.

Key Topics Covered:

1. Decision Making in Markets

   • Imperfect Competition
   • Economic Surplus
   • Social Welfare
   • Legal Rights of Stakeholders
   • Consumer and Employee Relations
   • Complexity in Business Decision Making

2. Assessments

   • Quiz 1: 15%
   • Case Study Analysis: 25%
   • Final Exam: 50%
   • Participation: 10%

3. Market Context of Business Decisions

   • Models to understand context.
   • Comparative advantage and specialization.
   • Market analysis: Demand and supply dynamics.
   • Market equilibrium.

4. Models of Decision Making

   • Definition and usefulness of models.
   • Importance of clear, predictive, and communicative models.

5. Trade Concepts

   • Life Without Trade:
     • Paul and Cassie's production comparison.
   • Absolute Advantage:
     • More goods with fewer resources.
   • Opportunity Cost and Comparative Advantage:
     • Lower opportunity costs lead to comparative advantage.
     • Paul has a comparative advantage in pastries, Cassie in coffee.
   • Benefits of Trade:
     • Trade allows for greater consumption than self-sufficiency.

6. Competitive Markets

   • Demand and Supply:
     • Market composed of buyers/sellers.
     • Price takers in a competitive market.
   • Individual Demand and Supply:
     • Reservation prices and opportunity costs.
     • Cost-benefit principle in buying/selling.
   • Market Equilibrium:
     • Price where quantity demanded equals quantity supplied.
     • Effects of excess supply or demand on prices.

7. Market Shifts

   • Examples of changes in equilibrium due to external conditions (e.g., harvest damage or sales).

8. Price Elasticity

   • Price Elasticity of Demand (PED):
     • How demand changes with price.
     • Influenced by substitutes, time horizon, and income share.
   • Price Elasticity of Supply (PES):
     • How supply changes with price.
     • Influenced by raw materials, inventories, and capacity.

9. Elasticity Calculation Practice

   • Examples and practice in calculating and interpreting elasticity.

Upcoming Topics:

• Evaluating competitive markets in societal outcomes.
• Impact of market power on competition.

Resources:

• Moodle Course Site: Moodle Link
• Course Email: [email protected]

Conclusion:

• Thank you for attending. Lecture recordings will be available on Moodle.