How Should a Monopoly Price?
So far a monopoly has been thought
of as a firm which has to sell its
product at the same price to every
customer. This is uniform pricing.
Can price-discrimination earn a
Supply From A Competitive Industry
How are the supply decisions of the
many individual firms in a
competitive industry to be combined
to discover the market supply curve
for the entire industry?
Supply From A Competiti
does a firm decide how much
product to supply? This depends
upon the firms
there many other firms, or just a
A firm is a cost-minimizer if it
produces any given output level y
0 at smallest possible total cost.
c(y) denotes the firms smallest
possible total cost for producing y
units of output.
c(y) is the fi
Types of Cost Curves
A total cost curve is the graph of a
firms total cost function.
A variable cost curve is the graph of
a firms variable cost function.
An average total cost curve is the
graph of a firms average total c
technology is a process by which
inputs are converted to an output.
E.g. labor, a computer, a projector,
electricity, and software are being
combined to produce this lecture.
market is in equilibrium when total
quantity demanded by buyers equals
total quantity supplied by sellers.
Effects of a Price Change
What happens when a commoditys
Substitution effect: the commodity
is relatively cheaper, so
consumers substitute it for now
relatively more expensive other
The principal behavioral postulate is
that a decisionmaker chooses its
most preferred alternative from those
available to it.
The available choices constitute the
How is the most preferred bundle in
Rationality in Economics
A decisionmaker always chooses its
most preferred alternative from its
set of available alternatives.
So to model choice we must model
Budgetary and Other
Constraints on Choice
Consumption Choice Sets
A consumption choice set is the
collection of all consumption
choices available to the consumer.
What constrains consumption
Budgetary, time and other
The Theory of Economics does not
furnish a body of settled conclusions
immediately applicable to policy. It is
a method rather than a doctrine, an
apparatus of the mind, a technique of
thinking which helps its possessor to