lecture07fall2006

lecture07fall2006 - % &&' '( ) *& +...

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( > 6 ' At a Addinghasup Ben’s and Jerry’s price of up Ben’s and Jerry’s Ben $3,an individual, Adding neither person S=SMC individual demands at each demands much an individual, downward-sloping demand Jerry individual ice cream.give also has demands price society’s demand at $3. gives society’s demand. curve for ice cream. downward-sloping demand curve for ice Adding up to a competitive cream. At a price of $2, both people and Jerry’s Leading Ben’s demand more ice cream. Ben give equilibrium atdemands & Jerry individual $2. consume different quantities. society’s demand at $2.a market supply curve There is associated with producing ice cream. $2 / &' DJERRY 0 QJERRY QBEN QTOTAL DBEN SMB =DBEN+JERRY Quantity of ice cream 5 % & . ( + ) ( ? .( + & 5 & ( &@ A 7 .( . ( ' + U B (C, IC ) U J (C, IC ) 7 $ & & @A 3 5 = . . MU MU B IC B C & & *& ( ) ( -+ PIC PC .( . (7 5 : >+ & %) & ) ( . A & ' &+ ' .( . >@ 6 & . . & & B = MRS IC ,C = (7 J MU IC P J = MRS IC ,C = IC J MU C PC 5 5 & & ) ( + ) .( & & & (& ' .+ 5 / & ( .( MC IC = PIC : B> + 6& B IC ,C 7 J IC ,C ( &' ) & . . / . ) . . ) 0& ) & ( . & (& ' &) ( ( MRS = MRS = PIC = MC IC 4 5 < '& & + ( . + ' + & Price of missiles $6 . . ( ' &'.& ( .& $4 $3 $2 $2 $1 0 ' > 6 Adding up up Ben’s and Jerry’s Adding Ben’s and Jerry’s willingness toto pay for each willingness pay gives society’s demand for 1 missile. quantity gives society’s demand. As does Jerry. There is a market supply curve Leading to a competitive associated with producing Adding up Ben’s and Jerry’s equilibrium at 5 missiles. Ben & to pay gives society’s willingness missiles Ben has a downward sloping Jerry consume the same Q. While Jerry’s missiles. to the for the 5th missile. Ben’s willingness to pay demand S=SMC demand DJERRYfor willingness for pay curve for the first missile is $4. first missile is $2. While Jerry’s willingness for pay Ben’s willingness to pay to the for the fifth missile is $2. fifth missile is $1. DBEN SMB=DBEN+JERRY 1 5 Quantity of missiles 5 & ( . ( + 1 5 & ( @8A 7 . . ( ' =' & . & & . / + .( + && + && ) .* + C U B ( C, M ) U J (C, M ) 7 $ & & @A & 5 5 & & ( & . 7 5 / & . & & ( & .7 . . @ 8-A . 1& * /-+ B MU M B = MRS M ,C B MU C i MRS M ,C + J MU M J = MRS M ,C J MU C & & 7 i $ 34 5 / & 7 & & ( . @8 A . & & 7 5 / & & ( / & + ( . . ) 1 . A & ' . & *& &. @ MC M 2. . . i M ,C ) 7 & . + & MRS i = MC M ' 1 6 :% /2 :5;% % 5 =-9% ; 5< 55, 7 ( = ( % + . & . & . ( + + + & . >+ . 6 ( ' ' ( 2 . ( = .) .& & ( .& . ! ' . ) & . ' ( - = + 7 ( $ 2 ( . = 7 ( MRS F , IC = 1, MU IC = MU F $ i MU F MU IC = 1, MU F = 2 MU IC & ( ) 7 : & % . / ( + & *& ' & . + & & . ( & ( & & ) ) & i MRS F , IC = 1 7 ! / 5 . & & ". D 0 % = *& + E &+ .. ( . +( . < . ' . -( $ . & *+ *& ( &' (& & &* ( &'& . . && 8 .. .F ( +' E & . " ! 2* & ( ( .( . . - ( ' . 6H G 7 . / , & *& ) . 6G + I! < & /& ) & + ' &' JD . ! (& @-% ,A ' & 1 /& / -% ,0 . . . ' ) ( % 6I+ I ( < .-% , .& & ?+ & / -% , < 8 ! 5 -% , / 3 ( .& ) 8 + 8 4 . -% , K ! . (& .-% , . + .* . + -% , ( .& = ' % = ( . & .& & . ( &'. &C 1 # $ . @ / & ( +( ( ' ( + % . & + ( . # ( ( . . . & A ( . .& . . ?& + & . . & & 5 L' .< /5+ & . A @6 J A IJ ( ( + . . ?& & . M . ( ' @ = & & & &* /+ + & ' ( 9 $ ( ( . + &( & & & * & /*& !. D * $ 9 * & & & . *& .& +. KD ! & .+ & + & & (. + % ! 5. %( / ' & % ! & + & * & ( & 7 . . .& ( 5 +& & @6 I A. IG & ( ( & . . . . &+ & . & (. & 10 ' . . / =-9% & . :5;% % 5 5< 55, + ( (& & & & & . =-9% ( ( & ( & ' ( & . ( % ( ( % ' ( & & + 7 *& + .. &' % + ( + ( & & & . & & ( ' 8 , & 1 . & " '( % & ( + ( . + ( &'& . . (. ( 0 + & ( & ( ( . & " '( *& +. ' (& ) & + . &7 ( ' *& & . % . & '( (& ( ( . .& (& ( & . ( ( . ( ' / ( ( . . ( 11 & " '( / . 7 1 * 5 ( . ( . ( ( ( .& & & " '( + % . @ 1. 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This note was uploaded on 02/07/2011 for the course ECO 479 taught by Professor Staff during the Fall '08 term at Kentucky.

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