N16-cost curves jpw - End of Consumer Theory and onto....

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
microL16-F20109-page http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ End of Consumer Theory and onto. . Lecture 16 Dr. Jennifer P. Wissink ©2009 John M. Abowd and Jennifer P. Wissink, all rights reserved. October 20,2010
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
microL16-F20109-page http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Announcements: Micro F2010 MEL REMINDER Quiz#06 and ToCatchUpQuiz#01 due soon, check the MEL site. Will post the next set of quizzes before the weekend. Prelim 2 It’s just around the corner! Yikes!! Thursday Nov 4 (5:15pm or 7:30pm) Friday Nov 5, AFTERNOON this time @ 3pm PELASE SEE THE SYLLABUS ON THE WEB PAGE FOR WHAT TO DO IF YOU HAVE CONFLICTS.
Background image of page 2
microL16-F20109-page http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Application #4: Two-Part Tariffs (Sam’s Club Example) Suppose: I = $2,000. P X = $10 and P Y = $10. Initially: X* =100 and Y* =100. Perfectly competitive firms sell Y . Sam’s Club has a monopoly (only seller) on X. Average total cost to make units of X for Sam’s Club is constant and equal to $5.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
microL16-F20109-page http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Sam’s “deal”: Pay $200 to join Sam’s Club then P X = $8. P Y is still $10 and Income is still $2,000. Note: you could still afford the old bundle: – Original bundle: X* old =100 and Y* old = 100 Budget constraint: $2,000=$200+$800+$1,000. Question: Will the consumer and Sam be better off? Application #4: Two-Part Tariffs (Sam’s Club Example)
Background image of page 4
microL16-F20109-page http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ X Y BL 0 IC 0 X* old=100 200 200 Application #4: Two-Part Tariffs (Sam’s Club Example) Y* old=100
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
microL16-F20109-page http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Consumer is on higher indifference curve Sam’s Club makes more profit: π old = ($10-$5)100 = $500 new = $200 + ($8-$5) X new Is new - old > 0? Is $200 + $3 X new - $500 > 0? Is $3 X new > $300? Is X new > $100? Yes. Since X new > 100 there is more profit! Q.E.D. X Y BL 0 BL N IC 0 IC new X* old X* new 200 200 Application #4: Two-Part Tariffs (Sam’s Club Example)
Background image of page 6
microL16-F20109-page http://www.arts.cornell.edu/econ/wissink/econ1110jpw/ Application #5: The Odd Case of Labor/Leisure and “All-Other-Goods” and Why Offer Overtime Wages?
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 20

N16-cost curves jpw - End of Consumer Theory and onto....

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online