Wednesday, January 16, 2013

http://baylorlariat.com/wp-content/uploads/2011/04/040711_cartoon1.jpg

This cartoon depicts the idea of derived demand. In the cartoon the producer/business (witch figure) changes her product in order to comply with the demand of green sources of energy that her closest customers value. Even though the seller has not actually switched her product yet, it is a classic example of allocative efficiency in todays society. This applies to our analysis of where to set prices and how to be successful in business, and our knowledge to produce at Price=Marginal Cost due to being allocatively efficient.

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