ECO 111 Lecture Notes - Lecture 4: Reservation Price
15 Sep 2016
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Markets > any place where buyers and sellers meet in a mutual exchange of goods and services. P1 is the reservation price of q1. Max price > price consumers will pay for q1. As price goes down, quantity goes up: income effect. As price goes down, we can afford more. As price of x goes down, the demand of x goes up and demand of y goes down. Supply accounts for the sellers in each market. Reservation price for seller is the minimum price at which they will sell q1. As qs increases, the rm experiences increasing opportunity costs (increased marginal costs) Corporations use most productive inputs 1st then, 2nd most etc. On a supply and demand graph, it"s where supply = demand r e n n a c. Shift to the right (increase of demand) When demand shifts to the right, the price and quantity will increase. Shift to the right (increase of supply)
