| Summary: | In this article, researchers S. Clemhout and H.Y. Wan, using a general equilibrium analysis, derived the optimal pricing policy for an open two-sector economy where technological change of the learning-by-doing type occurs. This note contains a much simpler approach to the same general topic of infant industry protection when a technological change occurs. It shows an interesting result which is that, in the case where only one sector grows, a partial equilibrium analysis based on the classic concepts of consumers' and producers' surplus will bring about the same type of result as does a general equilibrium analysis. One can assume a market for commodity Q, described by a domestic demand function p = a domestic industry cost function C(t) = C[Q(t), &ohgr;(t)], and an external supply (demand) function which is perfectly price elastic at price p*.
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