Economics 2150A/B Lecture Notes - Lecture 10: Marginal Cost, Indifference Curve, Market Power

• School: Western University
• Department: Economics
• Course: Economics 2150A/B
• Professor: Kristin Denniston

Document Summary

Homework #2: extended to thursday at noon. Problem 12. 20: 3rd degree, no capacity constraint, bargain travellers: q1 = 400 2p1, high end travellers: q2 = 500 p2, mc = /hotel room, market demand horizontal summation (sum quantities, not prices) Q = q1 + q2 = 400 2p1 + 500 p2. Q = 900 3p (demand: uniform price. Bargain: q1 = 40 2(160) = 80. High end: q2 = 500 160 = 340. Therefore the high end customers will buy more hotel rooms at the price of. We would want to offer a lower price to bring the bargain customers into the market: 3rd degree price discrimination. We have lowered the price for the bargain group from to . Two equations: mr1 = mr2, q1 + q2 = q (capacity constraint) *make sure that you find marginal revenue after converting your demand to the inverse form.