Problem 1. One of the major concerns of managers and managerial economics is the demand for a company's product. Many factors influence the demand curve for a product, and they all must be included, to some degree, in estimating the demand curve. Define the following factors and discuss how they can affect the demand curve for a product:
a. Inferior versus normal goods
b. Substitution and income effects
c. Derived demand
d. Changes in demand and changes in quantity demanded
Support your answers with examples and reasoning.
Problem 2. With regard to profit maximization, managers are concerned about the responsiveness of the quantity demanded for variables such as the price of a product, prices of related products, and consumer incomes. Describe the types of measures and information a manager requires to measure the effects of these variables on costs and revenues. How do these measures assist in profit-maximizing decisions?
Support your answers with examples and reasoning.