ECON 201 Lecture Notes - Lecture 19: Perfect Competition, Demand Curve, Economic Equilibrium
8 Nov 2018
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Econ 201 lecture 19 (chapter 9) part 2: perfect competition (wednesday 7/11 week 10) Additional information from the previous lecture: at p3 (break-even point), you are still making an accounting profit, even though economic profit is zero. It is the one and only optimum price: p4 (anything higher than p3) is also called a supernormal profit. Then for some reasons the demand goes from d1 to d2. Attract entries since other people see a high demand in the market. (happens because of free entry/exit) rightwards (increased in supply) until the equilibrium price fell back to pe. The same thing happens if demand curve goes from d1 to d3, eventually the price would be brought back to. Any quantity is consistent with the price pe. Free entry and free exit make sure the horizontal dash blue line at pe is the long-run industry supply curve.
