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1、Chapter Fifteen,Market Demand 市场需求,Structure,From Individual to Market Demand Functions Elasticities Revenue and own-price elasticity of demand Marginal revenue and price elasticity,From Individual to Market Demand Functions,Think of an economy containing n consumers, denoted by i = 1, ,n. Consumer
2、is 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 If all consumers are identical then where M = nm.,From Individual to Market Demand Functions,The market demand curve is the “ho
3、rizontal sum” of the individual consumers demand curves. E.g. suppose there are only two consumers; i = A,B.,From Individual to Market Demand Functions,p1,p1,20,15,p1,p1”,p1,p1”,From Individual to Market Demand Functions,p1,p1,p1,20,15,p1,p1”,p1,p1”,p1,From Individual to Market Demand Functions,p1,p
4、1,p1,20,15,p1,p1”,p1,p1”,p1,p1”,From Individual to Market Demand Functions,p1,p1,p1,20,15,35,p1,p1”,p1,p1”,p1,p1”,The “horizontal sum” of the demand curves of individuals A and B.,Elasticities (弹性),Elasticity measures the “sensitivity” of one variable with respect to another. The elasticity of varia
5、ble X with respect to variable Y is,Economic Applications of Elasticity,Economists use elasticities to measure the sensitivity of quantity demanded of commodity i with respect to the price of commodity i (own-price elasticity of demand,需求的自价格弹性) demand for commodity i with respect to the price of co
6、mmodity j (cross-price elasticity of demand,需求的交叉价格弹性).,Economic Applications of Elasticity,demand for commodity i with respect to income (income elasticity of demand 需求的收入弹性) quantity supplied of commodity i with respect to the price of commodity i (own-price elasticity of supply 供给的自价格弹性),Economic
7、 Applications of Elasticity,quantity supplied of commodity i with respect to the wage rate (elasticity of supply with respect to the price of labor) and many, many others.,Own-Price Elasticity of Demand,Q: Why not use a demand curves slope to measure the sensitivity of quantity demanded to a change
8、in a commoditys own price?,Own-Price Elasticity of Demand,X1*,5,50,10,10,slope = - 2,slope = - 0.2,p1,p1,In which case is the quantity demanded X1* more sensitive to changes to p1?,X1*,Own-Price Elasticity of Demand,5,50,10,10,slope = - 2,slope = - 0.2,p1,p1,X1*,X1*,In which case is the quantity dem
9、anded X1* more sensitive to changes to p1?,Own-Price Elasticity of Demand,5,50,10,10,slope = - 2,slope = - 0.2,p1,p1,10-packs,Single Units,X1*,X1*,In which case is the quantity demanded X1* more sensitive to changes to p1?,Own-Price Elasticity of Demand,5,50,10,10,slope = - 2,slope = - 0.2,p1,p1,10-
10、packs,Single Units,X1*,X1*,In which case is the quantity demanded X1* more sensitive to changes to p1? It is the same in both cases.,Own-Price Elasticity of Demand,Q: Why not just use the slope of a demand curve to measure the sensitivity of quantity demanded to a change in a commoditys own price? A
11、: Because the value of sensitivity then depends upon the (arbitrary) units of measurement used for quantity demanded.,Own-Price Elasticity of Demand,is a ratio of percentages and so has no units of measurement. Hence own-price elasticity of demand is a sensitivity measure that is independent of unit
12、s of measurement.,Point Own-Price Elasticity,E.g. Suppose pi = a - bXi. Then Xi = (a-pi)/b and,Therefore,Point Own-Price Elasticity,pi,Xi*,pi = a - bXi*,a,a/b,Point Own-Price Elasticity,pi,Xi*,pi = a - bXi*,a,a/b,Point Own-Price Elasticity,pi,Xi*,pi = a - bXi*,a,a/b,Point Own-Price Elasticity,pi,Xi*
13、,pi = a - bXi*,a,a/b,Point Own-Price Elasticity,pi,Xi*,a,pi = a - bXi*,a/b,Point Own-Price Elasticity,pi,Xi*,a,pi = a - bXi*,a/b,a/2,a/2b,Point Own-Price Elasticity,pi,Xi*,a,pi = a - bXi*,a/b,a/2,a/2b,Point Own-Price Elasticity,pi,Xi*,a,pi = a - bXi*,a/b,a/2,a/2b,Point Own-Price Elasticity,pi,Xi*,a,
14、pi = a - bXi*,a/b,a/2,a/2b,own-price elastic (有弹性),own-price inelastic (缺乏弹性),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) 单位弹性,Point Own-Price Elasticity,E.g.,Then,so,Point Own-Price Elasticity,pi,Xi*,everywhere along
15、the demand curve.,Revenue and Own-Price Elasticity of Demand,If raising a commoditys price causes little decrease in quantity demanded, then sellers revenues rise. Hence own-price inelastic demand causes sellers revenues to rise as price rises. If raising a commoditys price causes a large decrease in quantity demanded, then sellers revenues fall. Hence own-price elastic demand causes sellers revenues to fall as price rises.,Revenue and Own-Price Elasticity of Demand,Sellers revenue is,Revenue and Own-Price Elasticity of Demand,Sellers revenue is,So,Revenue and Own-Price Elasticity of Demand