2012.04.30 - ECON1101, Week 9 Lecture Notes

9 8 does andy owning land make a difference 9 9 the

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Unformatted text preview: STAY IN THE FARMING BUSINESS? 9-8 DOES ANDY OWNING LAND MAKE A DIFFERENCE? 9-9 THE INVISIBLE HAND THEORY !  Two 1.  functions of price: Rationing function !  2.  To distribute the scarce good to those consumers who value them most highly Allocative function !  To direct resources away from overcrowded markets and towards markets that are underserved 9-10 INVISIBLE HAND THEORY !  The actions of self-interested buyers and sellers, all acting independently, will often result in the socially optimal allocation of resources 9-11 HOW FIRMS RESPOND TO PROFITS AND LOSSES Figure 9.2 Economic profit in the short run in the apple market At an equilibrium price of $2 per kilogram (a), the typical orchard earns an economic pr...
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