Description
priceMinusMarginalCost = firmQuantity*inverseDemandSlope.
An economic model specifies how quantities, prices or marginal values relate under stated assumptions. A derivative, reaction function or first-order-condition term is a local model object rather than an empirical finding or complete equilibrium solution.
priceMinusMarginalCost = firmQuantity*inverseDemandSlope.
When to use this tool
Use Cournot One Firm Markup Term when checking one explicit theoretical economic-model relationship.
How to use the tool and how it works
- Enter firmQuantity, inverseDemandSlope. Use the units and conventions below.
- Run the tool. Correct any format, range, or cross-field input error before interpreting the output.
- Read priceMinusMarginalCost. Use the output convention below.
Require nonnegative firmQuantity and positive inverseDemandSlope. priceMinusMarginalCost = firmQuantity*inverseDemandSlope.1
| Input field | Meaning and units | Accepted input |
|---|---|---|
| firmQuantity | Firm Quantity | Required. Finite number; minimum 0. |
| inverseDemandSlope | Positive magnitude of inverse-demand decline per unit of total output. | Required. Finite number; strictly above 0. |
| Output field | Interpretation | Returned shape |
|---|---|---|
| priceMinusMarginalCost | Price Minus Marginal Cost | Required. Finite number. |
{
"input": {
"firmQuantity": 20,
"inverseDemandSlope": 2
},
"output": {
"priceMinusMarginalCost": 40
}
}Limitations and assumptions
- The slope is the positive magnitude of inverse demand's decline. This is one Cournot first-order-condition term, not a solution for equilibrium quantities or evidence of market power.
- Inputs must satisfy both the field types and the cross-field conditions above. Invalid input causes an error; a successful false flag or documented placeholder is a different result.
- Numeric calculations use binary floating point unless exact decimal-integer arithmetic is explicitly stated. No hidden measurement tolerance or decimal rounding is added; nonfinite or out-of-contract results are rejected. Numeric signed-zero results are exported as zero.
Alternative or Complementary methods
Use a complete model, defensible parameter estimates and suitable identification before drawing empirical or policy conclusions.
References
Similar or alternative tools
- Elasticity Logchange Residual
quantityLogChange = ln(quantityAfter)-ln(quantityBefore); predictedLogChange = elasticity*(ln(priceAfter)-ln(priceBefore)); residual is observed minus predicted.
- Cobweb Linear One Period Update
nextPrice = (demandIntercept-supplyIntercept-supplySlope*previousPrice)/demandSlope.