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Unformatted text preview: The figure above illustrates the supply and demand curves for the given situation. The curves intersect at point ( Eq ), which represents the equilibrium point of the system. If Pr[W] < Pr[W] Eq (below Eq in the figure), then we may have a situation where we are producing too many tickets (surplus) as the winning probability is too low to sell all the tickets. On the other hand, if Pr[W] > Pr[W] Eq (above Eq in the figure), we are producing too few tickets (shortage) and as there is an incentive for more people to purchase tickets, we could be making better profit. At Eq , there is no shortage or surplus; so Eq is a desirable point for both demand and supply sides. Eq Pr[W] Eq D Eq Demand Curve D Pr[W] Supply Curve...
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This document was uploaded on 02/05/2011.
- Spring '11