ECON 160 Lecture Notes - Lecture 14: Epinephrine Autoinjector, Imperfect Competition, Economic Equilibrium
28 Sep 2016
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Document Summary
Market equilibrium is efficient: achieved through the greed and rationality of the individual. Production is such that the benefit of consuming is always greater than or equal to the cost of production. Consumers are assumed to be fully informed, rational agents. We must ignore initial allocation in a market (example: being born with a lot of money). The price and quantity of epipen is not efficient. 10 = p, the equilibrium price is 10. Plug back into the original equation to find the equilibrium quantity: Q(d1) = 100 5p , q(s1) = 5p. Q(d2) = 100 p, q(s2) = p. D1 and s1 are more elastic than d2 and s2, because there is a higher change in quantity based on price. With a linear equation, the slope is constant; however, the elasticity changes depending on where on the graph it is calculated. The least change in price is when both demand and supply are elastic.
