_Lecture_08

_Lecture_08 - Lecture 8 1-minute review Consumer Theory...

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Unformatted text preview: Lecture 8 1-minute review Consumer Theory Many consumers? Exchange economy Where do goods come from? Production 1 Production: competitive firms firms cannot affect prices of inputs take market prices as given buy as much as they want at market prices firms cannot affect prices of outputs take market prices as given buy as much as they want at market prices 2 What is the objective of competitive firm? Maximize profit = revenue - cost 3 Complications that we (mostly) ignore time decisions today, results tomorrow inputs today, outputs tomorrow uncertainty aggregation/honogeneous commodities input: your labor/my labor output: Chinese restaurant meal/Indian restaurant meal profits for whom? 4 What decisions does firm make? whether to produce what to produce how to produce how much to produce 5 Answers? whether to produce if profit is possible, not otherwise what to produce whatever maximizes profit how to produce as cheaply as possible how much to produce whatever maximizes profit 6 Description?Description?...
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_Lecture_08 - Lecture 8 1-minute review Consumer Theory...

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