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1、Chapter SixteenEquilibrium均衡均衡1StructureuMarket equilibriumuQuantity tax and equilibriumuTax incidence （税收分担）税收分担）uDeadweight loss （额外净损失）额外净损失）2Market EquilibriumuA market is in equilibrium when total quantity demanded by buyers equals total quantity supplied by sellers.uAlso called “market is clea
2、red”uSupply may not equal production3Market EquilibriumpD(p), S(p)q=D(p)MarketdemandMarketsupplyq=S(p)4Market SettinguCompetitive marketContestable market5Market EquilibriumpD(p), S(p)q=D(p)MarketdemandMarketsupplyq=S(p)p*q*D(p*) = S(p*); the marketis in equilibrium.6Market EquilibriumpD(p), S(p)q=D
3、(p)MarketdemandMarketsupplyq=S(p)p*S(p)D(p) S(p); an excessof quantity supplied overquantity demanded.pD(p)7Market EquilibriumpD(p), S(p)q=D(p)MarketdemandMarketsupplyq=S(p)p*S(p)D(p) S(p”); an excessof quantity demandedover quantity supplied.p”S(p”)9Market EquilibriumpD(p), S(p)q=D(p)MarketdemandMa
4、rketsupplyq=S(p)p*D(p”)D(p”) S(p”); an excessof quantity demandedover quantity supplied.p”S(p”)Market price must rise towards p*.10Market Equilibrium Linear D & SAt the equilibrium price p*, D(p*) = S(p*).That is,which givesand11Market EquilibriumpD(p), S(p)D(p) = a-bpMarketdemandMarketsupplyS(p) =
5、c+dp12Market EquilibriumuCan we calculate the market equilibrium using the inverse market demand and supply curves?uYes, it is the same calculation.13Market Equilibriumthe equation of the inverse marketdemand curve. Andthe equation of the inverse marketsupply curve.14Market EquilibriumqD-1(q),S-1(q)
6、D-1(q) = (a-q)/bMarket inversedemandS-1(q) = (-c+q)/dp*q*At equilibrium,D-1(q*) = S-1(q*).Market inverse supply15Market EquilibriumandAt the equilibrium quantity q*, D-1(p*) = S-1(p*).That is,which givesand16Market EquilibriumqD-1(q),S-1(q)D-1(q) = (a-q)/bMarketdemandMarketsupplyS-1(q) = (-c+q)/d17M
7、arket EquilibriumuTwo special cases:lquantity supplied is fixed, independent of the market price, andlquantity supplied is extremely sensitive to the market price.18Market EquilibriumS(p) = c+dp, so d=0and S(p) c.pqq* = cMarket quantity supplied isfixed, independent of price.19Market EquilibriumS(p)
8、 = c+dp, so d=0and S(p) c.pqp*D-1(q) = (a-q)/bMarketdemandq* = cMarket quantity supplied isfixed, independent of price.20Market EquilibriumS(p) = c+dp, so d=0and S(p) c.pq p* =(a-c)/bD-1(q) = (a-q)/bMarketdemandq* = cp* = D-1(q*); that is,p* = (a-c)/b.Market quantity supplied isfixed, independent of
9、 price.21Market EquilibriumS(p) = c+dp, so d=0and S(p) c.pqD-1(q) = (a-q)/bMarketdemandq* = cp* = D-1(q*); that is,p* = (a-c)/b.with d = 0 give p* =(a-c)/bMarket quantity supplied isfixed, independent of price.22Market EquilibriumMarket quantity supplied isextremely sensitive to price.S-1(q) = p*.pq
10、p*23Market EquilibriumMarket quantity supplied isextremely sensitive to price.S-1(q) = p*.pqp*D-1(q) = (a-q)/bMarketdemandq*24Market EquilibriumMarket quantity supplied isextremely sensitive to price.S-1(q) = p*.pqp*D-1(q) = (a-q)/bMarketdemandq* =a-bp*p* = D-1(q*) = (a-q*)/b soq* = a-bp*25Comparati
11、ve StaticsuShifting demand curvesIncomePrice of other productsuShifting supply curvesTechnologyuTaxes26Quantity TaxesuA quantity tax levied at a rate of $t is a tax of $t paid on each unit traded.uIf the tax is levied on sellers then it is an excise tax.uIf the tax is levied on buyers then it is a s
12、ales tax.27Quantity TaxesuWhat is the effect of a quantity tax on a markets equilibrium?uHow are prices affected?uHow is the quantity traded affected?uWho pays the tax?uHow are gains-to-trade altered?28Quantity TaxesuA tax rate t makes the price paid by buyers, pb, higher by t from the price receive
13、d by sellers, ps.29Quantity TaxesuEven with a tax the market must clear.uI.e. quantity demanded by buyers at price pb must equal quantity supplied by sellers at price ps.30Quantity Taxesanddescribe the markets equilibrium.Notice that these two conditions apply nomatter if the tax is levied on seller
14、s or onbuyers.Hence, a sales tax rate $t has thesame effect as an excise tax rate $t.31Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*No tax32Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*$tAn excise taxraises the marketsupply curve by $t33Quant
15、ity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*An excise taxraises the marketsupply curve by $t,raises the buyersprice and lowers thequantity traded.$tpbqt34Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*An excise taxraises the marketsupply curve by $
16、t,raises the buyersprice and lowers thequantity traded.$tpbqtAnd sellers receive only ps = pb - t.ps35Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*No tax36Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*An sales tax lowersthe market demandcurve
17、by $t$t37Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*An sales tax lowersthe market demandcurve by $t, lowersthe sellers price andreduces the quantitytraded.$tqtps38Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*An sales tax lowersthe market de
18、mandcurve by $t, lowersthe sellers price andreduces the quantitytraded.$tpbpbqtpbAnd buyers pay pb = ps + t.ps39Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*A sales tax levied atrate $t has the sameeffects on themarkets equilibriumas does an excise taxlevied at rate $t.$
19、tpbpbqtpbps$t40Quantity Taxes & Market EquilibriumuWho pays the tax of $t per unit traded?uThe division of the $t between buyers and sellers is the incidence of the tax (税收分担税收分担).41Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*pbpbqtpbps42Quantity Taxes & Market Equilibr
20、iumpD(p), S(p)MarketdemandMarketsupplyp*q*pbpbqtpbpsTax paid by buyers43Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*pbpbqtpbpsTax paid by sellers44Quantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*pbpbqtpbpsTax paid by buyersTax paid by sellers45
21、Quantity Taxes & Market EquilibriumuE.g. suppose the market demand and supply curves are linear.46Quantity Taxes & Market Equilibriumand47Quantity Taxes & Market EquilibriumandWith the tax, the market equilibrium satisfiesandsoand48Quantity Taxes & Market EquilibriumandWith the tax, the market equil
22、ibrium satisfiesandsoandSubstituting for pb gives49Quantity Taxes & Market EquilibriumandgiveThe quantity traded at equilibrium is50Quantity Taxes & Market EquilibriumAs t 0, ps and pb theequilibrium price ifthere is no tax (t = 0) and qt the quantity traded at equilibriumwhen there is no tax.51Quan
23、tity Taxes & Market EquilibriumAs t increases, ps falls,pb rises, andqt falls.52Quantity Taxes & Market EquilibriumThe tax paid per unit by the buyer is53Quantity Taxes & Market EquilibriumThe tax paid per unit by the buyer isThe tax paid per unit by the seller is54Quantity Taxes & Market Equilibriu
24、mThe total tax paid (by buyers and sellerscombined) is55Tax Incidence and Own-Price ElasticitiesuThe incidence of a quantity tax depends upon the own-price elasticities of demand and supply.56Tax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtps57Tax Incidence and O
25、wn-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsChange to buyersprice is pb - p*.Change to quantitydemanded is q. q58Tax Incidence and Own-Price ElasticitiesAround p = p* the own-price elasticityof demand is approximately59Tax Incidence and Own-Price ElasticitiesAround p = p* the
26、 own-price elasticityof demand is approximately60Tax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtps61Tax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsChange to sellersprice is ps - p*.Change to quantitydemanded is q. q62Tax I
27、ncidence and Own-Price ElasticitiesAround p = p* the own-price elasticityof supply is approximately63Tax Incidence and Own-Price ElasticitiesAround p = p* the own-price elasticityof supply is approximately64Tax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*pbpbqtpbpsTax
28、paid by buyersTax paid by sellers65Tax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*pbpbqtpbpsTax paid by buyersTax paid by sellersTax incidence = 66Tax Incidence and Own-Price ElasticitiesTax incidence = 67Tax Incidence and Own-Price ElasticitiesTax incidence = So68Tax
29、 Incidence and Own-Price ElasticitiesTax incidence isThe fraction of a $t quantity tax paidby buyers rises as supply becomes moreown-price elastic or as demand becomesless own-price elastic.69Tax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsAs market demandbecom
30、es less own-price elastic, taxincidence shifts moreto the buyers. 70Tax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsAs market demandbecomes less own-price elastic, taxincidence shifts moreto the buyers. 71Tax Incidence and Own-Price ElasticitiespD(p), S(p)Marke
31、tdemandMarketsupplyps= p*$tpbqt = q*As market demandbecomes less own-price elastic, taxincidence shifts moreto the buyers. 72Tax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyps= p*$tpbqt = q*As market demandbecomes less own-price elastic, taxincidence shifts moreto the buye
32、rs. When e eD = 0, buyers pay the entire tax, even though it is levied on the sellers.73Tax Incidence and Own-Price ElasticitiesTax incidence isSimilarly, the fraction of a $t quantitytax paid by sellers rises as supplybecomes less own-price elastic or asdemand becomes more own-price elastic.74Deadw
33、eight Loss and Own-Price ElasticitiesuA quantity tax imposed on a competitive market reduces the quantity traded and so reduces gains-to-trade (i.e. the sum of Consumers and Producers Surpluses).uThe lost total surplus is the taxs deadweight loss（额外净损失）额外净损失）, or excess burden.75Deadweight Loss and
34、Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*No tax76Deadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*No taxCS77Deadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*No taxPS78Deadweight Loss and Own-Price ElasticitiespD(p),
35、S(p)MarketdemandMarketsupplyp*q*No taxCSPS79Deadweight Loss and Own-Price Elasticities$tqtCSThe tax reducesboth CS and PSpD(p), S(p)MarketdemandMarketsupplyp*q*pbpsPS80Deadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsCSPSThe tax reducesboth CS and PS,transfers
36、 surplusto governmentTax81Deadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsCSPSThe tax reducesboth CS and PS,transfers surplusto governmentTax82Deadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsCSPSThe tax reducesboth CS
37、and PS,transfers surplusto governmentTax83Deadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsCSPSThe tax reducesboth CS and PS,transfers surplusto government,and lowers total surplus.Tax84Deadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsup
38、plyp*q*$tpbqtpsDeadweight loss85Deadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsDeadweight loss fallsas market demandbecomes less own-price elastic.86Deadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyps= p*$tpbqt = q*Deadweight loss
39、 fallsas market demandbecomes less own-price elastic.When e eD = 0, the tax causes no deadweight loss.87Deadweight Loss and Own-Price ElasticitiesuDeadweight loss due to a quantity tax rises as either market demand or market supply becomes more own-price elastic.uIf either e eD = 0 or e eS = 0 then
40、the deadweight loss is zero.88Examples of Equilibrium AnalysisuPrice ceilinguMinimum pricelAgricultural price controllMinimum wage89pD(p), S(p)p*q*pmaxDABCEFqSPrice control CS=C-E PS=-C-FDWL=-E-F +waiting in lineqD90pD(p), S(p)p*q*pmaxDABCEFqmaxPrice control with rationing CS=C-E PS=-C-FDWL=-E-F +corruption91pD(p), S(p)p*q*psDABCEFqmaxPrice floor with acreage controlPayment=E+F+G CS=-B-E PS=B-F+paymentGovernment loss=paymentDWL=-E-FG92Minimum WageuSingle sector single type of laboruCovered vs. uncovered sectoruSkilled vs. unskilled workers93
