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Unformatted text preview: Econ 301 UBC Professor Sergei Severinov Supplement to Lecture Notes 15. Deriving Competitive Equilibrium Main characteristics are price p and quantity Q of the good sold at the market at the same price. This price and quantity are such that: (1) Supply=Demand i.e. D ( p ) = S ( q ) (2) Each consumer j = 1 ,...,m whose demand enters into D ( p ) maximizes her util- ity and consumes the optimal quantity D * j ( p ) at this price. i.e. D ( p ) = m j =1 D * j ( p ). Each consumer takes the price as given. (3) Each firm i = 1 ,...,n whose demand enters into S ( p ) maximizes its profits and 1 produces the optimal quantity S * i ( p ) at this price. i.e. D ( p ) = m j =1 D * j ( p ). Each con- sumer takes the price as given. Things to note: (i)Competitiveness: each consumer and firm takes the price as given and believes that she has no effect on it. When does this assumption make sense: There is a large number of small firms and consumers. Each one is perfectly in- formed about price.formed about price....
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This note was uploaded on 01/28/2011 for the course ECON 301 taught by Professor Chapple during the Spring '08 term at The University of British Columbia.
- Spring '08