Lecture 2

Lecture 2 - Q1: Does "supply" in supply curve...

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Q1 : Does "supply" in supply curve mean supply from a particular company or supply in the whole market? Answer : In this introductory chapter, I have only considered the market as a whole. Hence, supply refers here to market supply. We will see later on that we can also consider the supply curve of an individual firm. Q2 : On the price of complements, would a change in the price of helmets affect the demand curve for bicycles? Answer : Not in this particular case. In this example, bicycles drive the demand for helmets, but the relationship is not reciprocal: you may buy a helmet if you buy a bicycle to protect yourself, but there is no reason why you would buy a bicycle if you buy a helmet. In some other cases, the relationship could be reciprocal (application: air travel and hotel rooms). Q3 : On reservation price, clarification needed for slide 17. Answer : This slide is meant to explain why the demand curve shows the marginal buyer's reservation price. The demand curve shown in this graph is the market demand curve. We make an additional simplifying
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This note was uploaded on 04/21/2011 for the course ECON 1001 taught by Professor S.c during the Fall '10 term at HKU.

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