MI 101 Lecture Notes - Lecture 8: Sunk Costs, Progressive Alliance Of Socialists And Democrats, Marginal Cost
Document Summary
Basic economic concepts: economic agents firms, consumers, regulators. For fir(cid:373)s, assu(cid:373)e (cid:862)utility(cid:863) = profits: agents seek to maximize utility, utility ge(cid:374)erally su(cid:271)je(cid:272)t to (cid:862)di(cid:373)i(cid:374)ishi(cid:374)g retur(cid:374)s(cid:863, age(cid:374)ts assu(cid:373)ed to (cid:271)e ratio(cid:374)al (cid:862)(cid:271)ou(cid:374)ded ratio(cid:374)ality(cid:863, two key concepts. Supply and demand (s&d: revenues costs = profits (r-c=p) Supply and demand: demand curves are downward sloping, the lower the price, the more product or service will be purchased. If the price goes up people buy less/consume less of the product. Supply curves are upward sloping: the higher the price, the more product or services suppliers will provide. Will incr. production if already in the industry: the intersection of these 2 curves is where supply and demand meet, this determines market price and output (p1 & q1) If demand increases while supply stays the same, both price and quantity purchased will increase (p2 & q2)
