Podcast
Questions and Answers
What is the expression for the marginal cost obtained from the cost function?
What is the expression for the marginal cost obtained from the cost function?
How is the supply curve for good x derived in this context?
How is the supply curve for good x derived in this context?
What is the equilibrium price for good x in the short run?
What is the equilibrium price for good x in the short run?
What does the expression $X^D = X_S$ indicate in the context of the market?
What does the expression $X^D = X_S$ indicate in the context of the market?
Signup and view all the answers
What is the correct individual consumer demand function for good x?
What is the correct individual consumer demand function for good x?
Signup and view all the answers
What factor has no influence on market demand when applying Cobb-Douglas preferences?
What factor has no influence on market demand when applying Cobb-Douglas preferences?
Signup and view all the answers
What does the Marshallian demand function for a good x represent?
What does the Marshallian demand function for a good x represent?
Signup and view all the answers
In perfect competition, how do firms determine their supply of good x?
In perfect competition, how do firms determine their supply of good x?
Signup and view all the answers
What is the role of the capital fixed in the short run for a firm's production function?
What is the role of the capital fixed in the short run for a firm's production function?
Signup and view all the answers
In the context of the market demand curve, which of the following is true?
In the context of the market demand curve, which of the following is true?
Signup and view all the answers
What equation best represents market supply based on individual firms?
What equation best represents market supply based on individual firms?
Signup and view all the answers
What does partial equilibrium analysis focus on?
What does partial equilibrium analysis focus on?
Signup and view all the answers
If Firm 1 has a capital of K1 = 40 and Firm 2 has K2 = 20, what would you expect about their production capabilities in the short run?
If Firm 1 has a capital of K1 = 40 and Firm 2 has K2 = 20, what would you expect about their production capabilities in the short run?
Signup and view all the answers
Assuming three consumers have different incomes but face the same prices, how would their individual demands influence the market demand curve?
Assuming three consumers have different incomes but face the same prices, how would their individual demands influence the market demand curve?
Signup and view all the answers
Which utility function was used as an example to explain market demand in the content?
Which utility function was used as an example to explain market demand in the content?
Signup and view all the answers
What ensures that firms will continue operating in the market in the long run?
What ensures that firms will continue operating in the market in the long run?
Signup and view all the answers
What happens to the market supply curve when firms exit the market?
What happens to the market supply curve when firms exit the market?
Signup and view all the answers
In long run equilibrium, what is the relationship between price, marginal cost, and average cost?
In long run equilibrium, what is the relationship between price, marginal cost, and average cost?
Signup and view all the answers
If each firm in the market is producing according to the cost function C(Qx) = Q2x + 25, what is the form of the firm's marginal cost (MC)?
If each firm in the market is producing according to the cost function C(Qx) = Q2x + 25, what is the form of the firm's marginal cost (MC)?
Signup and view all the answers
What happens to profits when new firms enter the market due to positive profits in the short run?
What happens to profits when new firms enter the market due to positive profits in the short run?
Signup and view all the answers
Study Notes
Partial Equilibrium
- This concept isolates one market, while holding other markets constant
- It examines the interaction between consumers and firms in a given market
- Future study will cover general equilibrium, which considers interconnected markets
Market Demand Curve
- Definition: A consumer's Marshallian demand function shows the quantity of a good demanded at different prices and incomes to maximize utility
- Formula: Xm = x(Px, Py, I)
- Market Demand: The total demand for a good, calculated by summing the individual demands of all consumers in the market
- Formula: XD = Σ Xi(Px, Py, Ii) where n is the number of consumers.
- All consumers in the economy face the same prices
Short-Run Market Supply Curve
- The portion of the marginal cost curve above average variable cost
- Firms' individual supply depends on good X's price and input prices (e.g., labor and capital)
- Market Supply: The sum of all individual firms' supplies.
- Formula: Xs = Σ Q (Px, ω, υ), where n is the number of firms.
- Firms take prices as fixed in perfect competition
Short-Run Equilibrium
- Occurs when market supply equals market demand
- Formula: XD = XS
- Example: In one example, price = 10, quantity = 15
Long-Run Equilibrium
- Firms enter or exit the market until profits are zero
- Equilibrium price will change due to this entrance or exit
- Equilibrium will occur at P = MC = AC
Long-Run Supply Curve
- Its shape depends on how firm entry affects industry average costs
- Constant Cost: Average cost doesn't change with firm entry. Long-run supply is horizontal
- Increasing Cost: Average cost increases with firm entry. Long-run supply is upward sloping
- Decreasing Cost: Average cost decreases with firm entry. Long-run supply is downward sloping
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
This quiz covers critical economic concepts such as partial equilibrium, market demand, and supply curves. It explores how consumers and firms interact in a single market while holding other markets constant, alongside detailed examination of demand and supply functions. Prepare to test your understanding of these fundamental theories in economics.
