ECON 100B Lecture Notes - Lecture 12: Profit Maximization, Competitive Equilibrium, Economic Equilibrium
Document Summary
Mp l (l* (w/p), k bar) = w/p. W / p1 > w / p2 for all w. L* (w; p1) < l* (w, p2) for all w. The firm"s long run factor demands (same story) Mrpl(l*,k*) = w and mrpk(l ,k ) = r. page 224. Market"s quantity supplied is the sum of the quantities supplied by the firms in the industry. S (p) = (j=1 to m) sj (p) Where m is the number of firms in the industry sj is the supply function for firm j. The notion of partial equilibrium (a single market) image freeze all other markets both prices and quantities are freeze. Suppose that firms and consumers are price takers. Look for a condition of stability, or equilibrium, where at the market price the quantities supplied and demanded are in balance. Equilibrium price p* makes qs(p*) = qd(p*) Unemployment: demand (firms) > supply (workers)
