16equilibrium-ho

16equilibrium-ho - Marginal Revenue Competitive Equilibrium...

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Unformatted text preview: Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Equilibrium (Chapter 16) Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Today Marginal Revenue Competitive Equilibrium Intro Equilibrium: Comparative Statics Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Midterm Next Week Covers material up to end of this week: chapters 12,14,15,16 10-15 multiple choice, 2 blue-book In class on Tuesday Bring scrantron, bluebook, pencil (and pen) Returned in section (or OH) following week See syllabus, FAQ for more details Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Marginal Revenue Q: Why is the MR curve always below D ? A: Lower price to sell additional unit; earn extra p on additional unit, but lose revenue w/ lower price on all previous units. R = pq = MR = R q = p 1 + q p q Kale Price MR Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Marginal Revenue: Clicker Vote 2 How elastic is demand at the quantity at which MR = 0? A) Elastic B) Unit Elastic C) Inelastic D) Not enough info Kale Price MR Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Marginal Revenue Linear demand: p ( q ) = a- bq (inverse demand) Bats Price MR a a/2 a/(2b) Unit elasticity MR = a- 2 bq , so revenue maximizing ( p , q ) = ( a 2 , a 2 b ). Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Competitive Equilibrium: Motivating Questions Firms are price-takers in competitive markets, but how is the market price (and quantity) determined? competitive equilibrium What happens to equilibrium price and quantity when either supply or demand changes? comparative statics What are the effects of taxes and subsidies on prices and quantities?...
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This note was uploaded on 12/04/2010 for the course ECON 100B taught by Professor Kilenthong during the Winter '08 term at UCSB.

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16equilibrium-ho - Marginal Revenue Competitive Equilibrium...

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