ECON 1B03 Lecture Notes - Lecture 8: Economic Equilibrium, Perfect Competition, Marginal Revenue
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31 Mar 2016
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Many buyers and sellers in the market. Market demand and supply determine price and every buyer and firm takes the market equilibrium price as given they are price takers. The goods offered by various sellers are homogenous. Firms can freely enter or exit the market. Tells us how much revenue a firm receives for the typical unit sold. Ar = tr / q = pq / q = p. The change in tr from an additional unit sold. Mr = delta tr / delta q. Mr is the slope of the tr function. Since tr = pq, if we increase q by 1 unit, tr will increase by the p of that good. Mr = p (for a perfectly competitive firms that are price- takers) If we know a firm"s tc of producing at each of the q levels. Can easily calculate profit: pi = tr tc.
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