Econ 281 Chapter 3 University of Alberta281章3艾伯塔大学经济学.pptVIP

* * * In the economy, each market has many individuals demanding a good Each individual maximizes their own utility when deciding on the amount they will buy Each individual has a maximum price they will pay and a maximum amount of the item they would want Ie: I’d pay $5 per episode of House, up to 20 episodes…how much would you pay? The sum of individual demand creates market demand * Consider the following individuals’ demand for Sushi: Price $1 $2 $3 $4 Craig’s Demand 8 6 4 2 Kristy’s Demand 6 3 0 0 Total Demand 14 9 4 2 * Market Demand O Sushi Price ? ? DM ? DC DK Here the individual demand curves (DK and DC) combine to form market demand (DM). $4 2 $2 3 6 9 ? * Algebraically the demand curves are as follows: * Market Demand O Sushi Price ? ? DM ? DC DK In section A of market demand, Qm=Qc+QK. (it is important to add the normal form: Q=f(P), not the inverse form: P=f(Q).) In section B of market demand, Qm=QC. $4 2 $2 3 6 9 ? * Q = 10 - p Consumer 1 Q = 20 - 5p Consumer 2 Aggregate demand 4 10 Q Q Q P P P Q = 10 - p Q = 30 - 6p Note that at a price of $4, 10-p=30-6P=6 * Generally we assume that one consumer’s demand does not depend on the demand of others In some cases, a person’s demand has an EXTERNAL effect on another’s demand – an externality exists You are less likely to purchase a guard dog if your neighbour has one You are more likely to eat sushi if all your friends do * If one consumers demand for a good changes with the number of other consumers who buy the good, there are externalities. If one persons demand with the number of other consumers, then the externality is positive. If one persons demand with the number of other consumers, then the externality is negative. Examples: Telephone (physical network) Software (virtual network) decreases increases * Apple’s IPad has been growing in popularity and is an example of a bandwagon effect. People often buy an iPad because their friends have it -They ar