ECON1001 Lecture Notes - Lecture 6: Externality
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Phhiityofdemandd. no perfectly inelastic demand choreaction inquantitydemanded inelasticdemand quantitydemandreactsbyaporportionatelysmalleramountthanthe. I demand has unitary elasticitycprisesby6thensodoes g price change abovel a elastic demand perfectly elasticdemand quantitydemandeddisappears. D perfectlyinelasticsupply choreaction inquantitysupplied: l inelasticsupply quantitysuppliedreactsbyaporportionatelysmalleramountthanthe elasticitycprisesby6thensodoesg. I supply above1 elastic pricechange hgsuppyngitay a perfectlyelasticsupply quantitysupplieddisappears me elasticity of demand t a normal good demand changes inthe same direction up down with income inferior good demand changesinthe oppositeway toincome if 0 i if. I good has incomeinelasticdemand good has incomeelastic demand s as a resultofeconomics phrate paidbybuyersandsellerswheneconomicactivitytakesplace. To maximize profit setqtwhere mramc ncomsfdihefenfangtfe. meehg yminatc profit ocpna. tt ptt min atc profit okosses. P min atc profit o short run rs long run xedcostarealready aidtsunk nofixedcosts firmscanenterand i in armswillproduce. Plait fitscanbep05 heyandzero f iiiii iii andprofitsocifall firms areidentical. Marketfailure whenthefreemarketfailstoallocateresourcesatthesocially optimalleveland this leads to a netloss in socialwelfare int inpaei a. araaaaeaeaaionaom a separate agent. 0whichcame mores wduction d d benefits w firms consumption consumer. 0 whichwaydoesthecurvemore negative left social equilibriumconsidersfull ocial effects.