Eco 10-31 - them to charge d Marginal Revenue i The change...

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Econ Notes 10-31 1. Price Searching a. Assume firms are facing a downward sloping demand curve. b. Why? i. People are ignorant 1. They may not be aware of all the alternatives available to them ii. Firms may have advantages over other firms 1. For Exmp: Location iii. Products may be slightly different 1. Or Greatly different iv. Seller may be a monopolist c. In this case, firms are not price-takers, they are price searchers i. They don’t take the price as given, they are looking to find the best rice for
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Unformatted text preview: them to charge d. Marginal Revenue i. The change in total revenue based on the change in quantity 1. MR = Δ TR Δ Q ii. Initial MR= first price iii. The MR curve will always lie below the demand curve and it’s slope will be twice as great iv. The point where MR intersects the X-axis (extended upward to intersect the Demand curve) represents unit-elasticity. 1. Less demand (left of the point) elastic 2. More demand (right of the point) inelastic...
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