Tsinghua Micro Ch9 Buying and Selling 《微观经济学》.ppt

Chapter Nine Buying and Selling What Are We Doing in this Chapter? We expand our basic consumer choice framework to include the possibility that consumers can sell something to generate income. Again, in terms of theoretical framework, nothing is new. Endowments 禀赋 The list of resource units with which a consumer starts is his endowment. A consumer’s endowment will be denoted by the vector (omega). Endowments E.g.states that the consumer is endowed with 10 units of good 1 and 2 units of good 2. What is the endowment’s value? For which consumption bundles may it be exchanged? Budget Constraints Revisited So, given p1 and p2, the budget constraint for a consumer with an endowment is The budget set is Budget Constraints Revisited Budget Constraints Revisited Budget Constraints Revisited Budget Constraints Revisited The constraintis That is, the sum of the values of a consumer’s net demands is zero. Net Demands Net Demands Net Demands A Variation of the Theme: Income from Labor A worker is endowed with $m of nonlabor income and R hours of time which can be used for labor or leisure. w = (R,m). Consumption good’s price is pc. w is the wage rate. Labor Supply The worker’s budget constraint iswhere C, R denote gross demands for the consumption good and for leisure. That is Labor Supply Labor Supply Labor Supply Labor Supply The Morale of the Story: Limited Possibility of Market Transactions There are some cases in which a good cannot be sold or bought in any amount! Slutsky’s Equation Revisited Slutsky: changes to demands caused by a price change are the sum of a pure substitution effect, and an income effect. This assumed that income y did not change as prices changed. But does change with price. How does this modify Slutsky’s equation? Slutsky’s Equation Revisited A change in p1 or p2 changes so there will bean additional income effect, called the endowment income effect. Slutsky’s decom