ajaz_eco_204_2012_2013_chapter_16_Market_Power

The general rmp is ie cases b and d that requires

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Unformatted text preview: opolist has a constant elasticity demand function: Assume that , and that the firm has constant returns: To see the firm has a constant elasticity demand function recall that the price elasticity can be calculated by any of these two methods: 36 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. { Here, the log method will be faster: Since is a negative #, we can write the demand function as: We argued earlier that whenever unconstrained solution which for a company with a constant elasticity demand model Let us prove this once again. The general RMP is: (i.e. cases B and D) that requires that and ⏟ Re-arranging and subbing in price: () [( ) ] ⏟ ⏟ We have shown that whenever this fact: unconstrained solution (i.e. cases B and D) that . Let’s use () { } Revenue maximization in cases B and D means that: { } 37 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...
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This document was uploaded on 01/19/2014.

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