There are many different types of market structure. The main ones are: 1. Perfect Competition: Many small price-taking firms in an industry with free-entry. 2. Monopoly: One large price-setting firm in an industry with barriers to entry
Consumer surplus is a measure of how much money a consumer would need to be given, in order to be just willing to give up their entire consumption of a particular good. Consumer surplus is approximately the area behind the demand curve. The change in consumer surplus following aprice change is illustrated in the second graph
Consumers make choices over bundles of goods. Consumer theory models the way in which these choices are made. A good is simply a product — such as apples or bananas. A good may be specified in terms of time — such as
All the models considered so far have one thing in common. There is no uncertainty. This is a very restrictive assumption. Often in economic situations there is less than perfect information. Both production and consumption often involve unknown variables that affect the profits and utility of the agents
In the last lecture two concepts were introduced: Pareto efficiency and general equilibrium. How do they relate? Theorem: The first welfare theorem states that every general equilibrium involves a Pareto efficient llocation
Production — Oligopoly 1 Cournot Duopoly Suppose there are two firms in an industry. Their strategy spaces are quantities. Their payoffs are profits. Industry demand is given by the inverse demand function, P(Q), where industry production is Q = q1 + q2. They
1. Who am I? Chris Wallace, Lecturer at the Department of Economics, Oxford University and Fellow in Economics at Trinity College. 2. What do I do? Teach economics and research in the field of game theory. 3. Who are you? First year students taking either the Philosophy, Politics and Economics (PPE) degree
