Economics of the Price Leadership (Dominant Firm) Model

Описание к видео Economics of the Price Leadership (Dominant Firm) Model

This video gives a numerical example of how to solve price leadership problems. We will do the following:

1. Derive the dominant firm's demand curve by subtracting the market supply curve of the smaller firms from the market demand curve.

2. The dominant firm maximizes profit (MR = MC) based on its demand curve calculated in step 1. This step gives the market price and output of the dominant firm.

3. The quantity supplied by the smaller firms is found by taking the price determined in step 2 and plugging it into the market supply equation of smaller firms.

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