August 30, 2007
Theory of the Firm
A numerical example of calculating marginal costs:
A graph of our simple example:
The general case is a U-Shaped Average Cost Curve:
Different firms might have different costs:
The marginal cost curve intersects the average cost curve at the minimum of the average cost curve. Proof:
If adding one more unit change the average cost a bit, the marginal cost can be quite different from the average cost.
Posted by bparke at 11:39 PM | Comments (0)
August 28, 2007
Theory of the Consumer
Indifference curves are a relief map of a utility function.
The budget constraint shows the set of possible consumption bundles.
Changing the price of one of the goods constructs a demand curve for that good.
Understanding income and substitution effects is a goal of ours.
Posted by bparke at 11:39 PM | Comments (0)
August 23, 2007
Supply and Demand
We begin with supply and demand. The traditional approach is to divide this into the Theory of the Consumer and the Theory of the Firm.
The Theory of the Consumer relies heavily on the Two Goods - Two Prices diagram.
We are paying particular attention this semester to an important property of indifference curves:
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August 21, 2007
Welcome
Posted by bparke at 11:25 PM | Comments (0)