Problem 2 (15 marks) Each of two firms can advertise (A) or not (N). If both adv
ID: 1154590 • Letter: P
Question
Problem 2 (15 marks) Each of two firms can advertise (A) or not (N). If both advertise, they each make a profit of $300. If neither advertises, they each make a profit of $450. (a) (5 marks) Write this information down in a game matrix. What information is missing? Your answer: (b) (2 marks) What is a Nash equilibrium of a game? Your answer: (c) (4 marks) Copy down the game matrix you wrote down (a). Complete this game matrix with payoffs that make the only Nash equilibrium a situation where the second firm advertises and the first firm does not. Your answer:Explanation / Answer
575 answers
In the classical case the supply curve us vertical so changes in supply can change the output. Changes in aggregate demand will not bring about any change in output. This is why we say says law is correct.
In Keynesian case AS is horizontal and more emohaempis out on AD POLICIES.
Today's market has both the characteristics, Apple has a near vertical SS where supply creates it's own demand where in case of general automobiles demand creates the supply.
Classical case of ending a recession is to leave the market play on it's own. There is no need for any readjustment by the government. Keynesian economics argues for fiscal and monetary policy stimulating the demand in the economy.
The mainly differ on the principle of shape or AS curve.