Tutorial | November 2004

Principles of Microeconomics for Strategists

by Felix Oberholzer-Gee, Pai-Ling Yin and Elizabeth Raabe

Abstract

Reviews microeconomic principles from a business strategy perspective, using the digital music industry as context. Contains three modules: demand, supply, and equilibrium. The demand module discusses the willingness to pay, market demand, price elasticity, and marginal revenue. The supply module explains elements of concern to a Sony manager producing hard drives for MP3 players--fixed, variable, marginal, and average costs; and short-run and long-run elasticity of supply. The third module discusses equilibrium and market power, optimal pricing, and price discrimination. Includes several exercises to test learning.

Keywords: Business Strategy; Supply and Industry; Demand and Consumers; Microeconomics; Balance and Stability; Price; Cost; Revenue; Music Industry;

Citation:

Oberholzer-Gee, Felix, Pai-Ling Yin, and Elizabeth Raabe. Principles of Microeconomics for Strategists. Harvard Business School Tutorial 705-801, November 2004.