ECON-2006EG Study Guide - Quiz Guide: Reservation Price, Marginal Cost, Marginal Utility

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[p. 96 how do we explain price fluctuation: i. e. demand curves fluctuate sharply and supply curves are highly inelastic inflation in short-term] Unique and essential inputs: the ultimate supply bottleneck. Extremely limited supply (top footballers high transfer sums & salaries) Supply of places in the bundesliga is perfectly inelastic (restrictions) In the long run unique and essential inputs are the only truly significant supply bottleneck (that"s why we still have low supply elasticities) Miscalculations of elasticity through an unknown change of the demand curve. [example: suppose that there is a potential buyer whose reservation price for an additional slice of pizza is 4 and a potential seller whose reservation price is only 2 . The efficiency principle = efficiency is an important social goal, because when the economic pie" grows larger, everyone can have a larger slice: market does not always lead to the greatest good for all:

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