平狄克微观经济学英文.docVIP

Chapter 4: Individual and Market Demand PAGE PAGE 53 CHAPTER 4 INDIVIDUAL AND MARKET DEMAND TEACHING NOTES Chapter 4 relies on two important ideas from Chapter 3: the influence of price and income changes on the budget line, and how to determine the optimal consumer choice. The chapter focuses on deriving individual demand graphically by changing either price or income, determining the income and substitution effects of a price change, deriving market demand, demand elasticity, and consumer surplus. These concepts are crucial to understanding the application of demand and supply analysis in Chapter 9 as well as the discussion of market failure in Parts III and IV. The analytical tools students learn in this chapter will be important for the discussion of factor supply and demand in Chapter 14. When discussing the derivation of demand, review how the budget curve pivots around an intercept as price changes and how optimal quantities change as the budget line pivots. Once students understand the effect of price changes on consumer choice, they can grasp the derivation of the price consumption path and the individual demand curve. Remind students that the price a consumer is willing to pay is a measure of the marginal benefit of consuming another unit. Income and substitution effects are often difficult for the student to understand, and they frequently have trouble remembering which effect is which on the graph. Emphasize that the substitution effect explains the portion of the change in demand caused by the change in relative prices (a pivot of the budget line) and the income effect explains the portion of the change in demand caused by a change in purchasing power (a shift of the budget line). The distinction between normal and inferior goods is used to determine the direction of the income effect. You might point out that the demand curve can only slope upwards if the good is inferior and the income effect is unusually large (a Giffen good). Doing a lo