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Lecture 9

ECON101 Lecture Notes - Lecture 9: Demand Curve


Department
Economics
Course Code
ECON101
Professor
Corey Van De Waal
Lecture
9

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A Change in Demand
- Increase in demand rightward shift of the market demand
curve price rises and the quantity increases
- Decrease in demand leftward shift of the market demand
curve price falls and the quantity decreases
Profits and Losses in the Short Run
- Maximum profit is not always a positive economic profit
- Break-even point the point at which total cost and total
revenue are equal
- In the short run, three possible profit-maximizing outcomes can
occur
o Price = average total cost zero economic profit breaks
even just earn normal profit
o Price > average total cost positive economic profit
o Price < average total cost negative economic profit (loss)
- In long-run equilibrium, firms break even because firms can enter
or exit the market
* Firms enter the market as long as firms make economic profits
In the long run, the market price falls until firms are making zero
economic profit.
And now, the short run profits have all been taken and we achieve the
long run equilibrium where all firms make zero economic profit
A Closer Look at Exit
- When a firm in the market incurs economic loss, it has an
incentive to exit the market
- When they do, the market supply decreases and the market price
rises
o In the long run, the price continues to rise until firms make
zero economic profit
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