MICROECONOMICS is about
1. Buying decisions of the individual
2. Buying and selling decisions of the firm
3. The determination of prices and in markets
4. The quantity, quality and variety of products
6. Consumers satisfaction
There are two sid
35. Profit maximization. Profits, (q), generated by production level q are
defined as revenues, R(q), minus costs, C(q),
(q) = R(q) - C(q).
In the simplest case, revenues are price times quantity R(q) = pq.
36. Typically, profits
and the income effect. There is a natural tendency to buy more of the cheaper
good. This is measured, roughly speaking, by the substitution effect. The
extra money left-over unspent after the price decrease may be spent on X or on
Y. The increase or decre
shoes, Y is right shoes; X is personal computer CPUs, Y is video monitors
9. A consumer can be thought of as assigning a level of satisfaction (or utility)
to each bundle, utility of bundle (x, y) is U(x, y). Then, all bun
revenue is intimately related to elasticity. Note that when the demand is
horizontal, or perfectly elastic,
= , the formula for marginal revenue
gives MR = p(1 - 0) = p. For a downward sloping demand, see Figure 30, and
the table below.
player knows all the moves that have happened up to that point. All the
information sets contain only a single decision node, and the game is of perfect
information. In the Simultaneous Incumbent-Entrant game (Figure 36),
player I is not sure of player E'
Note that the present value of a bond is inversely related to the interest rates r1,
r2, ., rn.
The US Treasury issues bonds and notes of many durations. For
simplicity, suppose a period is a year, and there are bonds of duration of one
year B1, two y
each firm faces a downward-sloping demand function. Therefore each firm has
some influence over price. This distinguishes monopolistic competition from
perfect competition. In monopolistic competition there are strategic interactions
among firms, but they
Stay out is a best reply to High Q, and High Q is a best reply to Stay
out. This is no coincidence. At the non-cooperative equilibrium no player has
an incentive to deviate from the strategy he plays. This means that his strategy
is the best among all the