微观经济学Individual and Market Demand.pptVIP

Chapter 4 Chapter 4 Individual and Market Demand Topics to be Discussed Individual Demand Income and Substitution Effects Market Demand Consumer Surplus Network Externalities Empirical Estimation of Demand Individual Demand Price Changes Using the figures developed in the previous chapter, the impact of a change in the price of food can be illustrated using indifference curves For each price change, we can determine how much of the good the individual would purchase given their budget lines and indifference curves Effect of a Price Change Effect of a Price Change Effect of a Price Change By changing prices and showing what the consumer will purchase, we can create a demand schedule and demand curve for the individual From the previous example: Effect of a Price Change Demand Curves – Important Properties The level of utility that can be attained changes as we move along the curve At every point on the demand curve, the consumer is maximizing utility by satisfying the condition that the MRS of food for clothing equals the ratio of the prices of food and clothing Effect of a Price Change Individual Demand Income Changes Using the figures developed in the previous chapter, the impact of a change in the income can be illustrated using indifference curves Changing income, with prices fixed, causes consumers to change their market baskets Effects of Income Changes Individual Demand Income Changes The income-consumption curve traces out the utility-maximizing combinations of food and clothing associated with every income level Individual Demand Income Changes An increase in income shifts the budget line to the right, increasing consumption along the income-consumption curve Simultaneously, the increase in income shifts the demand curve to the right Effects of Income Changes Effects of Income Changes Individual Demand Income Changes When the income-consumption curve has a positive slope: The quantity demanded increases with income The income elasticity of demand is positive