- •Price and output determination under the perfect competition. Profit maximization under perfect competition. Firms behavior under perfect competition.
- •Basic characteristics of perfect competition.
- •T otal notions approach to profit max of a firm.
- •A verage and marginal notions approach to profit max of a firm.
- •The behavior of the firm under perfect competition.
- •Equilibrium of the firm in the lr.
- •Profit maximization under monopoly.
- •Monopoly:
- •Dem. And mr of the monopolistic firm.
- •The behavior of the firm under perfect competition.
- •Last week was said!!!
- •Equilibrium of the firm in the lr.
- •Profit maximization under monopoly.
- •Monopoly:
- •Dem. And mr of the monopolistic firm.
- •Oligopoly.
- •The basic characteristics of an oligopoly:
- •Explicit collusions:
- •Rules of thumb models.
- •Kinked d-curve. Assumptions:
- •Maximax strategy (optimistic approach). Ex:
- •Cournot model / duopoly (2 firms in industry) 1830s.
- •Isoprofit curve and the reaction function of firm 2.
- •Isoprofit curve and the reaction function of firm 2.
- •Market equilibrium in different market structures.
- •Algebraic explanation of the Cournot model.
- •Stackelberg model (quantity leadership model).
- •Contestable markets model.
- •Oligopoly and public.
- •Monopolistic competition.
- •Major characteristics:
- •Lr equilibrium
- •Minuses”-”.
- •Derived dem. For ec. Resources.
- •Equilibrium of the firm on the resource market.
- •Sr equilibrium:
- •Lr equilibrium(all factors are variable):
- •Wage determination under Perfect competition.
- •Wage determination under imperfect competition.
- •The theory of distribution of income II. Capital(k) and Land.
- •Concepts of capital.
- •Measuring k.
- •How does the firm invest?
- •Sell bills/bonds to the households.
- •Sr rentals include:
- •Demand and Supply for k purchase.
- •Fairness and effectiveness
- •Inequality in income and wealth distribution
- •Distr. Of income and wealth characteristics:
- •Pareto efficiency and Edgeworth box.
- •Edgeworth box
- •Pareto efficiency allocation:
- •P rinciple possibility of losses compensation.Icks
- •There are positive and negative external effects, divided into 4 groups:
- •Taxes (Pigourian taxes)
- •Sell the right to pollute for example.
- •Public goods –
Fairness and effectiveness
Inequality in income and wealth distribution
Distr. Of income and wealth characteristics:
Distr. by factor(functional distribution) – factors are: land(rent), labour(wages), entrepr. ability(profit), capital(interest).
!!! In Russia today – wages = 30-40% of GDP labour isn’t a major source of income and people often try to find some illegal sources of income.
By size of income(we can divide population into groups(10%(decile), 20%(quintile), 25%(quartile))
Population |
% of income |
Sum of pop. |
% sum |
20% |
6% |
20% |
6% |
20% |
10% |
40% |
16% |
20% |
17% |
60% |
33% |
20% |
22% |
80% |
55% |
20% |
45% |
100% |
100% |
Lorenz curve(LC) – graphical income device, which shows the degree of inequality in income distribution by size.
Gini coefficient(GC) – shows the degree of inequality in income distribution.
!!! Soc. countries GC = 0,2 – 0,25
By occupation(region, industry, etc)
!!! Income – flow concept(received regularly)
!!! Wealth – stock concept(estimated at a particular time moment)
Inequal. in wealth distrib > Ineq. in income distrib.
Factor of inheritance
Differences in persomal propensities to save
Inequality in income distribution
Inequl. in individual productivity, talents, skill, etc…
Pareto efficiency and Edgeworth box.
Pareto efficiency – takes place, when it’s not possible to improve the well being of anyone, without making someone else worth off.(we assume that there is only 2 people in the society)
Pareto improvement – takes place, when changes in production and consumption can make at least one person better off, without making anyone worth off(X Y)
Edgeworth box
Pareto efficiency allocation:
takes place, when there is no way to make all the people better off.
all the gains from trade have been exhausted
there are no mutually advantageous trades to be made.
Contract curve(CC) – each person is on his highest possible IC, given the IC of the other person.