Partial Equilibrium Approach

Partial Equilibrium Approach  In the partial equilibrium approach to pricing, we explain price determination of a single commodity, keeping the prices of other commodities.  We assume that the prices 01 various commodities are independent of one another and do not...

DETERMINATION OF SHORT-RUN PRICE

DETERMINATION OF SHORT-RUN PRICE In a preceding chapter, we explained that in the short-run a firm is in equilibrium at the output at which price equals marginal cost. It was also pointed out that, during the short-run, fixed costs arc disregarded in making a decision...

Price as a Rationing Device

Price as a Rationing Device  We shall discuss more fully later the role of price in a modern economy. We may only say here that price is a signal to the producers to expand or contract production and a warning to the consumers as to the possible shortage of the...