Theme 2.2 & 2.3 — Lecture Notes

<#>Theme 2.2 & 2.3 — Lecture Notes

📄 School/H2 Economics/Theme2.2_2.3_LectureNotes.pdf

<##>Coverage

• Theme 2.2: Firms and Decisions — objectives, cost/revenue, economies of scale, strategies (growth, diversification, shut-down, price competition, price discrimination, innovation, marketing, collusion), impact on efficiency and consumer welfare, cognitive biases
• Theme 2.3: Microeconomic Objectives and Policies — efficiency vs equity, deadweight loss, market failure (public goods, externalities, info failure, factor immobility, market dominance), policy toolkit, government failure

• Profit: $\pi = TR - TC$
• Profit max: $MR = MC$ (MC rising)
• Revenue max: $MR = 0$
• Allocative efficiency: $P = MC$
• Social optimum: $MSB = MSC$
• DWL when $MSB \neq MSC$