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1、Chapter SixteenEquilibrium均衡均衡北大微观经济学课件ch16EquilibriumStructureuMarket 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)北大微观经济学课件ch16EquilibriumMarket EquilibriumuA market is in equilibrium when total quantity demanded by buyers equals total quantity su
2、pplied by sellers.uAlso called “market is cleared”uSupply may not equal production北大微观经济学课件ch16EquilibriumMarket EquilibriumpD(p), S(p)q=D(p)MarketdemandMarketsupplyq=S(p)北大微观经济学课件ch16EquilibriumMarket SettinguCompetitive marketContestable market北大微观经济学课件ch16EquilibriumMarket EquilibriumpD(p), S(p)q
3、=D(p)MarketdemandMarketsupplyq=S(p)p*q*D(p*) = S(p*); the marketis in equilibrium.北大微观经济学课件ch16EquilibriumMarket EquilibriumpD(p), S(p)q=D(p)MarketdemandMarketsupplyq=S(p)p*S(p)D(p) S(p); an excessof quantity supplied overquantity demanded.pD(p)北大微观经济学课件ch16EquilibriumMarket EquilibriumpD(p), S(p)q=
4、D(p)MarketdemandMarketsupplyq=S(p)p*S(p)D(p) S(p”); an excessof quantity demandedover quantity supplied.p”S(p”)北大微观经济学课件ch16EquilibriumMarket EquilibriumpD(p), S(p)q=D(p)MarketdemandMarketsupplyq=S(p)p*D(p”)D(p”) S(p”); an excessof quantity demandedover quantity supplied.p”S(p”)Market price must ris
5、e towards p*.北大微观经济学课件ch16EquilibriumMarket Equilibrium Linear D & SAt the equilibrium price p*, D(p*) = S(p*).That is,which givesand北大微观经济学课件ch16EquilibriumMarket EquilibriumpD(p), S(p)D(p) = a-bpMarketdemandMarketsupplyS(p) = c+dp北大微观经济学课件ch16EquilibriumMarket EquilibriumuCan we calculate the mark
6、et equilibrium using the inverse market demand and supply curves?uYes, it is the same calculation.北大微观经济学课件ch16EquilibriumMarket Equilibriumthe equation of the inverse marketdemand curve. Andthe equation of the inverse marketsupply curve.北大微观经济学课件ch16EquilibriumMarket EquilibriumqD-1(q),S-1(q)D-1(q)
7、 = (a-q)/bMarket inversedemandS-1(q) = (-c+q)/dp*q*At equilibrium,D-1(q*) = S-1(q*).Market inverse supply北大微观经济学课件ch16EquilibriumMarket EquilibriumandAt the equilibrium quantity q*, D-1(p*) = S-1(p*).That is,which givesand北大微观经济学课件ch16EquilibriumMarket EquilibriumqD-1(q),S-1(q)D-1(q) = (a-q)/bMarket
8、demandMarketsupplyS-1(q) = (-c+q)/d北大微观经济学课件ch16EquilibriumMarket EquilibriumuTwo special cases:lquantity supplied is fixed, independent of the market price, andlquantity supplied is extremely sensitive to the market price.北大微观经济学课件ch16EquilibriumMarket EquilibriumS(p) = c+dp, so d=0and S(p) c.pqq*
9、= cMarket quantity supplied isfixed, independent of price.北大微观经济学课件ch16EquilibriumMarket EquilibriumS(p) = c+dp, so d=0and S(p) c.pqp*D-1(q) = (a-q)/bMarketdemandq* = cMarket quantity supplied isfixed, independent of price.北大微观经济学课件ch16EquilibriumMarket EquilibriumS(p) = c+dp, so d=0and S(p) c.pq p*
10、 =(a-c)/bD-1(q) = (a-q)/bMarketdemandq* = cp* = D-1(q*); that is,p* = (a-c)/b.Market quantity supplied isfixed, independent of price.北大微观经济学课件ch16EquilibriumMarket 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
11、)/bMarket quantity supplied isfixed, independent of price.北大微观经济学课件ch16EquilibriumMarket EquilibriumMarket quantity supplied isextremely sensitive to price.S-1(q) = p*.pqp*北大微观经济学课件ch16EquilibriumMarket EquilibriumMarket quantity supplied isextremely sensitive to price.S-1(q) = p*.pqp*D-1(q) = (a-q)
12、/bMarketdemandq*北大微观经济学课件ch16EquilibriumMarket 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*北大微观经济学课件ch16EquilibriumComparative StaticsuShifting demand curvesIncomePrice of other productsuS
13、hifting supply curvesTechnologyuTaxes北大微观经济学课件ch16EquilibriumQuantity 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 sales tax.北大微观经济学课件ch16EquilibriumQuantity
14、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?北大微观经济学课件ch16EquilibriumQuantity TaxesuA tax rate t makes the price paid by buyers, pb, higher by t from the price recei
15、ved by sellers, ps.北大微观经济学课件ch16EquilibriumQuantity 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.北大微观经济学课件ch16EquilibriumQuantity Taxesanddescribe the markets equilibrium.Notice that these two conditions
16、 apply nomatter if the tax is levied on sellers or onbuyers.Hence, a sales tax rate $t has thesame effect as an excise tax rate $t.北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*No tax北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumpD(p),
17、 S(p)MarketdemandMarketsupplyp*q*$tAn excise taxraises the marketsupply curve by $t北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*An excise taxraises the marketsupply curve by $t,raises the buyersprice and lowers thequantity traded.$tpbqt北大微观经济学课件ch
18、16EquilibriumQuantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*An excise taxraises the marketsupply curve by $t,raises the buyersprice and lowers thequantity traded.$tpbqtAnd sellers receive only ps = pb - t.ps北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumpD(p),
19、S(p)MarketdemandMarketsupplyp*q*No tax北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*An sales tax lowersthe market demandcurve by $t$t北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*An sales tax lowe
20、rsthe market demandcurve by $t, lowersthe sellers price andreduces the quantitytraded.$tqtps北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*An sales tax lowersthe market demandcurve by $t, lowersthe sellers price andreduces the quantitytraded.$tpbpbq
21、tpbAnd buyers pay pb = ps + t.ps北大微观经济学课件ch16EquilibriumQuantity 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 $t.$tpbpbqtpbps$t北大微观经济学课件ch16EquilibriumQuantity Taxes & Ma
22、rket 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).北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*pbpbqtpbps北大微观经济学课件ch16EquilibriumQuantity Taxes & Marke
23、t EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*pbpbqtpbpsTax paid by buyers北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsupplyp*q*pbpbqtpbpsTax paid by sellers北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumpD(p), S(p)MarketdemandMarketsuppl
24、yp*q*pbpbqtpbpsTax paid by buyersTax paid by sellers北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumuE.g. suppose the market demand and supply curves are linear.北大微观经济学课件ch16EquilibriumQuantity Taxes & Market Equilibriumand北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumandWith
25、 the tax, the market equilibrium satisfiesandsoand北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumandWith the tax, the market equilibrium satisfiesandsoandSubstituting for pb gives北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumandgiveThe quantity traded at equilibrium is北大微观经济
26、学课件ch16EquilibriumQuantity 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.北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumAs t increases, ps falls,pb rises, andqt falls.北大微观经济学课件ch16E
27、quilibriumQuantity Taxes & Market EquilibriumThe tax paid per unit by the buyer is北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumThe tax paid per unit by the buyer isThe tax paid per unit by the seller is北大微观经济学课件ch16EquilibriumQuantity Taxes & Market EquilibriumThe total tax paid (by bu
28、yers and sellerscombined) is北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiesuThe incidence of a quantity tax depends upon the own-price elasticities of demand and supply.北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtps北大微
29、观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsChange to buyersprice is pb - p*.Change to quantitydemanded is q. q北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiesAround p = p* the own-price elasticityof demand is approximat
30、ely北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiesAround p = p* the own-price elasticityof demand is approximately北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtps北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price Elasti
31、citiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsChange to sellersprice is ps - p*.Change to quantitydemanded is q. q北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiesAround p = p* the own-price elasticityof supply is approximately北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price
32、 ElasticitiesAround p = p* the own-price elasticityof supply is approximately北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*pbpbqtpbpsTax paid by buyersTax paid by sellers北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiespD(p), S(
33、p)MarketdemandMarketsupplyp*q*pbpbqtpbpsTax paid by buyersTax paid by sellersTax incidence = 北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiesTax incidence = 北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiesTax incidence = So北大微观经济学课件ch16EquilibriumTax Incidence and Own
34、-Price ElasticitiesTax incidence isThe fraction of a $t quantity tax paidby buyers rises as supply becomes moreown-price elastic or as demand becomesless own-price elastic.北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsAs market demandb
35、ecomes less own-price elastic, taxincidence shifts moreto the buyers. 北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsAs market demandbecomes less own-price elastic, taxincidence shifts moreto the buyers. 北大微观经济学课件ch16EquilibriumTax Inci
36、dence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyps= p*$tpbqt = q*As market demandbecomes less own-price elastic, taxincidence shifts moreto the buyers. 北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyps= p*$tpbqt = q*As market dem
37、andbecomes less own-price elastic, taxincidence shifts moreto the buyers. When e eD = 0, buyers pay the entire tax, even though it is levied on the sellers.北大微观经济学课件ch16EquilibriumTax Incidence and Own-Price ElasticitiesTax incidence isSimilarly, the fraction of a $t quantitytax paid by sellers rise
38、s as supplybecomes less own-price elastic or asdemand becomes more own-price elastic.北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price ElasticitiesuA quantity tax imposed on a competitive market reduces the quantity traded and so reduces gains-to-trade (i.e. the sum of Consumers and Producers Su
39、rpluses).uThe lost total surplus is the taxs deadweight loss(额外净损失)额外净损失), or excess burden.北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*No tax北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsu
40、pplyp*q*No taxCS北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*No taxPS北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*No taxCSPS北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price El
41、asticities$tqtCSThe tax reducesboth CS and PSpD(p), S(p)MarketdemandMarketsupplyp*q*pbpsPS北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsCSPSThe tax reducesboth CS and PS,transfers surplusto governmentTax北大微观经济学课件ch16EquilibriumDeadwe
42、ight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsCSPSThe tax reducesboth CS and PS,transfers surplusto governmentTax北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsCSPSThe tax reducesboth CS and PS,tra
43、nsfers surplusto governmentTax北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsCSPSThe tax reducesboth CS and PS,transfers surplusto government,and lowers total surplus.Tax北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price Elasticiti
44、espD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsDeadweight loss北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price ElasticitiespD(p), S(p)MarketdemandMarketsupplyp*q*$tpbqtpsDeadweight loss fallsas market demandbecomes less own-price elastic.北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price E
45、lasticitiespD(p), S(p)MarketdemandMarketsupplyps= p*$tpbqt = q*Deadweight loss fallsas market demandbecomes less own-price elastic.When e eD = 0, the tax causes no deadweight loss.北大微观经济学课件ch16EquilibriumDeadweight Loss and Own-Price ElasticitiesuDeadweight loss due to a quantity tax rises as either
46、 market demand or market supply becomes more own-price elastic.uIf either e eD = 0 or e eS = 0 then the deadweight loss is zero.北大微观经济学课件ch16EquilibriumExamples of Equilibrium AnalysisuPrice ceilinguMinimum pricelAgricultural price controllMinimum wage北大微观经济学课件ch16EquilibriumpD(p), S(p)p*q*pmaxDABCE
47、FqSPrice control CS=C-E PS=-C-FDWL=-E-F +waiting in lineqD北大微观经济学课件ch16EquilibriumpD(p), S(p)p*q*pmaxDABCEFqmaxPrice control with rationing CS=C-E PS=-C-FDWL=-E-F +corruption北大微观经济学课件ch16EquilibriumpD(p), S(p)p*q*psDABCEFqmaxPrice floor with acreage controlPayment=E+F+G CS=-B-E PS=B-F+paymentGovernment loss=paymentDWL=-E-FG北大微观经济学课件ch16Equilibrium