ECON 1013 Lecture Notes - Lecture 12: Demand Curve, Oligopoly
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4 Nov 2016
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Computing the effect of imposing or increasing a sales tax on the distribution of the tax burden or government tax revenues. Computing the effect of an increase by an oligopoly rm of the price of its product on its market share and pro ts. Concept of elasticity summarizes nearly the information. Ep = %change in quantity demanded / %change in price (need this to be higher than 1) Total pro t = total revenue - total costs. To sell more the monopoly rm must reduce its price. If increase in sales more than offsets the decline in price total revenue goes up. If increase in sales less than offsets the decline price total revenue goes down. Total revenue = price * quantity sold = price * quantity demanded. Change in revenue = new price * change in quantity sold - Price goes down = quantity demanded goes up.
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