中级微观经济学课件01.pdfVIP

Chapter 1 The Market Economic Modeling • Economics is to study the human behavior in resource allocation – Incentive is the key to understand economics – Model is the tool to study economics • At what level of detail shall we model an economic phenomenon? • Which variables are determined outside the model (exogenous) and which are to be determined by the model (endogenous)? Modeling the Apartment Market • How are apartment rents determined? • Suppose – apartments are close or distant, but otherwise identical • 燕东园V.S. 肖家河 – distant apartments rents are exogenous and known – many potential renters and landlords Modeling the Apartment Market • Who will rent close apartments? • At what price? • Will the allocation of apartments be desirable in any sense? • How can we construct an insightful model to answer these questions? Economic Modeling Assumptions • Two basic postulates: – Rational Choice: Each person tries to choose the best alternative available to him or her. – Equilibrium: Market price adjusts until quantity demanded equals quantity supplied. Modeling Apartment Demand • Demand: Suppose the most any one person is willing to pay to rent a close apartment is $500/month. Then p = $500 ⇒QD = 1. • Suppose the price has to drop to $490 before a 2nd person would rent. Then p = $490 ⇒QD = 2. Modeling Apartment Demand • The lower is the rental rate p, the larger is the quantity of close apartments demanded p ↓⇒QD ↑. • The quantity demanded vs. price graph is the market demand curve for close apartments. Market Demand Curve for Apartments p QD Modeling Apartment Supply • Supply: It takes time to build more close apartments so in this short-run the