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WEEK2 - COMM1100

Feb 24, 2025

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:

Conclusion:

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