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Recitation 2
Wednesday June 16th 2004
1 Behind the demand and supply curves
2 Monopoly
Main ideas so far:
Supply and Demand Model
Analyzing the model - positive - e.g. equilibrium, shocks
Welfare/Efficiency - normative
Policies/intervention - taxes, price controls, minimum wages
Now we are familiar with the demand/supply model we want to deepen our understanding
by looking underneath the demand and supply curves to the underlying theories of firms
and consumers.
Behind Supply and Demand
Demand
For consumers utility theory is what we use to model consumer behavior. The most
important implication of this model is that it generates a downward sloping demand curve
Our theory of the consumer is UTILITY THEORY. We assume consumers allocate their
income to maximize their utility. Most important implication of this theory is the
EQUIMARGINAL PRINCIPLE. For any goods, good 1 and good 2, the following
equation is satisfied.
Can think of this in terms of BANG FOR THE BUCK - the consumer allocates each dollar
in such a way that at the margin it is generating the same " bang " - in terms of utility -
which is what the consumer cares about.
Applied Economics For Managers Recitation 2 ….pdf
(2.82 MB, 需要: 30 个论坛币)
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