中微课件范里安版MicroCh15章节幻灯片.pptVIP

Chapter Fifteen Market Demand What Is the Purpose of This Chapter? We aggregate individual demand and form a market demand function. We study a property of the market demand function 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 From Individual to Market Demand Functions p1 p1 p1 20 15 35 p1’ p1” p1’ p1” p1’ p1” The “horizontal sum”of the demand curvesof individuals A and B. An Important Concept: Elasticity Elasticity measures the “sensitivity” of one variable with respect to another. The elasticity of variable X with respect to variable Y is Slope Vs. Elasticity Q: Why not just use the slope of a demand curve to measure the sensitivity of quantity demanded to a change in a commodity’s own price? A: Because the value of sensitivity then depends upon the (arbitrary) units of measurement used for quantity demanded. Arc and Point Elasticities An “average” own-price elasticity of demand for commodity i over an interval of values for pi is an arc-elasticity, usually computed by a mid-point formula. Elasticity computed for a single value of pi is a point elasticity. Point Own-Price Elasticity pi Xi* pi’ What is the own-price elasticityof demand in a very small intervalof prices centered on pi’? is the elasticity at the point Point Own-Price Elasticity E.g. Suppose pi = a - bXi. Then Xi = (a-pi)/b and Therefore, Point Own-Price Elasticity pi Xi* a pi = a - bXi* a/b a/2 a/2b own-price elastic own-price inelastic (own-price unit elastic) Point Own-Price Elasticity E.g. Then so Point Own-Price Elasticity pi Xi* everywhere alongthe demand curve. Revenue and Own-Price Elasticity of Demand Sellers’ revenue is So Revenue and Own-Price Elasticity of Demand so if then and a change to price does not altersellers’ revenue