MARGINAL PRICE CHANGES ARE WEIGHTED AVERAGES OF MARGINAL SHIFTS IN THE INVERSE DEMAND AND MARGINAL COST FUNCTIONS IN OLIGOPOLISTIC MARKETS.
The comparative statics of market prices under profit maximization imply that marginal price changes are weighted averages of marginal changes in weighted averages of shifts in household inverse demand functions and firm's marginal cost functions. This result may or may not lend itself to empirical...
| Publicado en: | Southern Economic Journal Vol. 44; no. 2; pp. 201 - 208 |
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| Formato: | Artículo |
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Wiley-Blackwell
Oct77
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| Acceso en línea: | Ver este registro en EBSCOhost |
| Sumario: | The comparative statics of market prices under profit maximization imply that marginal price changes are weighted averages of marginal changes in weighted averages of shifts in household inverse demand functions and firm's marginal cost functions. This result may or may not lend itself to empirical work on pricing in oligopolistic markets. In any case it is a clear implication of common assumptions concerning markets and must be acknowledged on a theoretical level. The Marginal Price Change Theorem ties together the influences of demand, cost and market structure on market price. The role of shifts in the inverse demand functions is made explicit and can be useful in modelling demand pull inflation. <BR> The Marginal Price Change Theorem also enables one to analyze the impact of an additional producer or consumer on market prices. This problem is difficult to analyze using traditional geometric models. The fact that differentiated product markets may be analyzed with the results of this paper increases greatly the opportunity of economic analysis to deal with realistic situations. <BR> The use of input-output analysis in predicting price levels now involve the assumption that prices will be equal to marginal costs (perfect competition), but this limitation may be remedied. The Marginal Price Change Theorem may be coupled with input-output analysis to predict changes in an economy involving varying degrees of competition in industries. |
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