ajaz_eco_204_2012_2013_chapter_16_Market_Power

53 eco 204 chapter 16 analysis of firms with market

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Unformatted text preview: d D we needed when ? Notice that for a firm with a constant unit elasticity demand model: { For case B to occur we require that () } { Why can’t we maximize profits } ( ) which would mean that: ⏟ This is a contradiction which proves that it is impossible to maximize profits if a company has a constant elasticity demand model with . Recalling that: When Case A Impossible Monopoly Profit Maximization Problem Case B Case C Case D () () () When () When neither Case B or C occur ⏟ found by () () () () We now show that a company with a constant elasticity demand model with () ( ): Let’s prove this. For the PMP solution to be case C we require must always be in cases B or D. 53 ECO 204 Chapter 16: Analysis of Firms with Market Power (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. () { () } This is a contradiction which means that a company with a constant elasticity demand model with be in cases B or D. () When will th...
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This document was uploaded on 01/19/2014.

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