VarianChapterMarketDemand培训教程文件.pptVIP

Chapter Fifteen Market Demand From Individual to Market Demand Functions Think of an economy containing n consumers, denoted by i = 1, … ,n. Consumer i’s ordinary demand function for commodity j is From Individual to Market Demand Functions When all consumers are price-takers, the market demand function for commodity j is If all consumers are identical then where M = nm. From Individual to Market Demand Functions The market demand curve is the “horizontal sum” of the individual consumers’ demand curves. E.g. suppose there are only two consumers; i = A,B. From Individual to Market Demand Functions From Individual to Market Demand Functions From Individual to Market Demand Functions From Individual to Market Demand Functions Elasticities Elasticity measures the “sensitivity” of one variable with respect to another. The elasticity of variable X with respect to variable Y is Economic Applications of Elasticity Economists use elasticities to measure the sensitivity of quantity demanded of commodity i with respect to the price of commodity i (own-price elasticity of demand) demand for commodity i with respect to the price of commodity j (cross-price elasticity of demand). Economic Applications of Elasticity demand for commodity i with respect to income (income elasticity of demand) quantity supplied of commodity i with respect to the price of commodity i (own-price elasticity of supply) Economic Applications of Elasticity quantity supplied of commodity i with respect to the wage rate (elasticity of supply with respect to the price of labor) and many, many others. Own-Price Elasticity of Demand Q: Why not use a demand curve’s slope to measure the sensitivity of quantity demanded to a change in a commodity’s own price? Own-Price Elasticity of Demand Own-Price Elasticity of Demand Own-Price Elasticity of Demand Own-Price Elasticity of Demand Own-Price Elasticity of Demand Q: Why not just use the slope of a demand curve to measure the sensitivity of quantity demanded