so fx = 0. Then the profit hill in Figure II shifts down by a constant to f2,
leaving the profit-maximizing price unchanged, but increasing the politicalequilibrium
price and buffering the fall in profits that would otherwise occur.
Of course, as is the case in consumer choice, one cannot rule out "inferiority"
of price decreases or profit increases.II But the "normal" purely
political component of the response to cost changes involves consumers
shielding producers from some of the effects of cost increases and producers
sharing some of their gains from cost reductions.
The case of a shift in demand is more complex, because the demand
function enters indirectly into the M function: Mp depends on the relationship
between price and consumer surplus, which depends on the height of
demand. Formally, a change in demand, dy, yields