Price-Taking Model

 bhi_ball.gif (2470 bytes)Assumptions

Pt3.gif (140 bytes) Individual demand curve Vs Market demand curve

Pt3.gif (140 bytes) Wealth maximization condition

Pt3.gif (140 bytes) LR competitive equilibrium

Pt3.gif (140 bytes) Non - identical cost : there exists marginal firm and intramarginal firm

Pt3.gif (140 bytes) Graphical illustration of a firm in case of loss, break even and earning a rent

Pt3.gif (140 bytes) SR and LR wealth maximization condition

Pt3.gif (140 bytes) SR supply curve = rising portion of MC curve above the minimum point of AVC

 

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