New answers tagged price
4
The profit of a firm $i$ is given by:
$$
\pi_i(p) = p q_i - C_i(q_i)
$$
where $p$ is the price, $q$_i is the output of firm $i$ and $C_i(.)$ is the cost function which differs across firms.
The first order condition gives:
$$
p = \frac{\partial C_i(q_i)}{\partial q_i} = MC_i(q_i^\ast)
$$
This shows how to obtain the optimal supply of firm $i$, i.e. where $MC(...
2
Premise of your question is simply false. You state (emphasis mine):
Price elasticity of demand $\mathrm{e_{D,P} = \dfrac{dD}{dP}. \dfrac{P}{Q^*}}$ clearly depends on the levels of price and quantity.
Incorrect. Consider trivial counter example. A perfectly reasonable demand can be given by:
$$ Q = A p^{-\epsilon} $$
where $Q$ is quantity, $p$ price and $...
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