Managerial Economics Page 1

Production analysis

Total production of iphone 6 will increase due
to high demand and after some time when all
interested people buys it for experience now,
after review of iphone some another people
will again buys it for their use and as another
competitors launches same technology at
different price then people shift to them and as
a result their demand for that particular product
will fall and again they have to come again
with their new idea to attract people again.
whereas difference in production which is
marginal product first increases and becomes
maximum then from next quarter start
declining and fall to zero and again from next
quarter/year became negative. Whereas the
case is different with average product first it
will rise continuously and in next quarter/year
becomes maximum and at the last it falls at
increasing rate.





Stages Total product Marginal product Average product
Stage 1 Increases at increasing
rate till point A
Start increasing and
becomes maximum at
point A
Continuously rising till point
B
Stage 2 Increases at diminishing
rate and becomes max at
point B
Falls from A to point B
to point C and become
zero at point C
Becomes max at point B and
start falling from point B
Stage 3 Start falling from point
C
Become negative from
point C
Falling at increasing rate
Managerial Economics Page 2

Consumer and producer surplus

Market forces and equilibrium data
Year 1 Year 2 Year 3 Year 4
Buyer (Amt. in
Rs)
40000 20000 10000 5000
Seller (Amt. in
Rs)
5000 10000 20000 40000

Since actual data company does not reveal officially I have taken imaginary figures to explain
the concept. So in year 1 buyer is willing to pay 40000 when seller bears the cost 5000,
whereas in year 2 buyer is willing to pay 20000 when seller bears the cost 10000, whereas in
year 3 buyer is willing to pay 10000 when seller bears the cost 20000, whereas in year buyer
is willing to pay 5000 when seller bears the cost 40000.so seeing above figure we can see that
the lower right angled triangle with hypotenuse CE is producer surplus whereas the upper
triangle with hypotenuse AE shows consumer surplus.