PPT 英文chapter_4

1、,Chapter 4,Individual and Market Demand,Chapter 4,Slide 2,Topics to be Discussed,Individual Demand Income and Substitution Effects Market Demand Consumer Surplus,Chapter 4,Slide 3,Topics to be Discussed,Network Externalities Empirical Estimation of Demand,Chapter 4,Slide 4,Individual Demand,Price Ch

2、anges Using the figures developed in the previous chapter, the impact of a change in the price of food can be illustrated using indifference curves.,Chapter 4,Slide 5,Effect of a Price Change,Food (units per month),Clothing (units per month),Chapter 4,Slide 6,Price-Consumption Curve,Effect of a Pric

3、e Change,Food (units per month),Clothing (units per month),4,5,6,U2,U3,A,B,D,U1,4,12,20,The price-consumption curve traces out the utility maximizing market basket for the various prices for food.,Chapter 4,Slide 7,Effect of a Price Change,Food (units per month),Price of Food,Chapter 4,Slide 8,Indiv

4、idual Demand,Two Important Properties of Demand Curves 1)The level of utility that can be attained changes as we move along the curve.,The Individual Demand Curve,Chapter 4,Slide 9,Individual Demand,Two Important Properties of Demand Curves 2)At every point on the demand curve, the consumer is maxim

5、izing utility by satisfying the condition that the MRS of food for clothing equals the ratio of the prices of food andclothing.,The Individual Demand Curve,Chapter 4,Slide 10,Effect of a Price Change,Food (units per month),Price of Food,Chapter 4,Slide 11,Individual Demand,Income Changes Using the f

6、igures developed in the previous chapter, the impact of a change in the income can be illustrated using indifference curves.,Chapter 4,Slide 12,Effects of Income Changes,Food (units per month),Clothing (units per month),An increase in income, with the prices fixed, causes consumers to alter their ch

7、oice of market basket.,Assume: Pf = $1 Pc = $2 I = $10, $20, $30,Chapter 4,Slide 13,Effects of Income Changes,Food (units per month),Price of food,An increase in income, from $10 to $20 to $30, with the prices fixed, shifts the consumers demand curve to the right.,Chapter 4,Slide 14,Individual Deman

8、d,Income Changes The income-consumption curve traces out the utility-maximizing combinations of food and clothing associated with every income level.,Chapter 4,Slide 15,Individual Demand,Income Changes An increase in income shifts the budget line to the right, increasing consumption along the income

9、-consumption curve. Simultaneously, the increase in income shifts the demand curve to the right.,Chapter 4,Slide 16,Individual Demand,Income Changes When the income-consumption curve has a positive slope: The quantity demanded increases with income. The income elasticity of demand is positive. The g

10、ood is a normal good.,Normal Good vs. Inferior Good,Chapter 4,Slide 17,Individual Demand,Income Changes When the income-consumption curve has a negative slope: The quantity demanded decreases with income. The income elasticity of demand is negative. The good is an inferior good.,Normal Good vs. Infe

11、rior Good,Chapter 4,Slide 18,An Inferior Good,Hamburger (units per month),Steak (units per month),Chapter 4,Slide 19,Individual Demand,Engel Curves Engel curves relate the quantity of good consumed to income. If the good is a normal good, the Engel curve is upward sloping. If the good is an inferior

12、 good, the Engel curve is downward sloping.,Chapter 4,Slide 20,Engel Curves,Food (units per month),30,4,8,12,10,Income ($ per month),20,16,0,Chapter 4,Slide 21,Engel Curves,Food (units per month),30,4,8,12,10,Income ($ per month),20,16,0,Consumer Expendituresin the United States,Entertainment7009471

13、2741514205426544300 Owned Dwellings1116172522533243445457939898 Rented Dwellings1957217023712536213715401266 Health Care1031169719181820205222142642 Food2656338541094888542962208279 Clothing85997813631772177826143442,ExpenditureLess than1,000-20,000-30,000-40,000-50,000-70,000- ($) on:$10,00019,0002

14、9,00039,00049,00069,000and above,Income Group (1997 $),Chapter 4,Slide 23,Individual Demand,1) Two goods are considered substitutes if an increase (decrease) in the price of one leads to an increase (decrease) in the quantity demanded of the other. e.g. movie tickets and video rentals,Substitutes an

15、d Complements,Chapter 4,Slide 24,Individual Demand,2) Two goods are considered complements if an increase (decrease) in the price of one leads to a decrease (increase) in the quantity demanded of the other. e.g. gasoline and motor oil,Substitutes and Complements,Chapter 4,Slide 25,Individual Demand,

16、3) Two goods are independent when a change in the price of one good has no effect on the quantity demandedof the other,Substitutes and Complements,Chapter 4,Slide 26,Individual Demand,Substitutes and Complements If the price consumption curve is downward-sloping, the two goods are considered substit

17、utes. If the price consumption curve is upward-sloping, the two goods are considered complements. They could be both!,Chapter 4,Slide 27,Income and Substitution Effects,A fall in the price of a good has two effects: Substitution & Income Substitution Effect Consumers will tend to buy more of the goo

18、d that has become relatively cheaper, and less of the good that is now relatively more expensive.,Chapter 4,Slide 28,Income and Substitution Effects,A fall in the price of a good has two effects: Substitution & Income Income Effect Consumers experience an increase in real purchasing power when the p

19、rice of one good falls.,Chapter 4,Slide 29,Income and Substitution Effects,Substitution Effect The substitution effect is the change in an items consumption associated with a change in the price of the item, with the level of utility held constant. When the price of an item declines, the substitutio

20、n effect always leads to an increase in the quantity of the item demanded.,Chapter 4,Slide 30,Income and Substitution Effects,Income Effect The income effect is the change in an items consumption brought about by the increase in purchasing power, with the price of the item held constant. When a pers

21、ons income increases, the quantity demanded for the product may increase or decrease.,Chapter 4,Slide 31,Income and Substitution Effects,Income Effect Even with inferior goods, the income effect is rarely large enough to outweigh the substitution effect.,Chapter 4,Slide 32,Income and SubstitutionEff

22、ects: Normal Good,Food (units per month),O,Clothing (units per month),Chapter 4,Slide 33,Food (units per month),O,R,Clothing (units per month),F1,S,F2,T,A,U1,E,Substitution Effect,D,Income and SubstitutionEffects: Inferior Good,Chapter 4,Slide 34,Income and Substitution Effects,A Special Case-The Gi

23、ffen Good The income effect may theoretically be large enough to cause the demand curve for a good to slope upward. This rarely occurs and is of little practical interest.,Chapter 4,Slide 35,Effect of a Gasoline Tax With a Rebate,Assume Ped = -0.5 Income = $9,000 Price of gasoline = $1,Chapter 4,Sli

24、de 36,Effect of a Gasoline Tax With a Rebate,Gasoline Consumption (gallons/year),Expenditures On Other Goods ($),Chapter 4,Slide 37,Market Demand,Market Demand Curves A curve that relates the quantity of a good that all consumers in a market buy to the price of that good.,From Individual to Market D

25、emand,Chapter 4,Slide 38,Determining the Market Demand Curve,16101632 2481325 3261018 404711 50246,PriceIndividual AIndividual BIndividual CMarket ($)(units)(units)(units)(units),Chapter 4,Slide 39,Summing to Obtain aMarket Demand Curve,Quantity,1,2,3,4,Price,0,5,5,10,15,20,25,30,Chapter 4,Slide 40,

26、Market Demand,Two Important Points 1)The market demand will shift to the right as more consumers enter the market. 2) Factors that influence the demands of many consumers will also affect the market demand.,Chapter 4,Slide 41,Market Demand,Elasticity of Demand Recall: Price elasticity of demand meas

27、ures the percentage change in the quantity demanded resulting from a 1-percent change in price.,Chapter 4,Slide 42,Price Elasticity andConsumer Expenditure,DemandIf Price Increases,If Price Decreases, Expenditures:Expenditures:,Inelastic (Ep 1) DecreaseIncrease,Chapter 4,Slide 43,Market Demand,Point

28、 Elasticity of Demand For large price changes (e.g. 20%), the value of elasticity will depend upon where the price and quantity lie on the demand curve.,Chapter 4,Slide 44,Market Demand,Point Elasticity of Demand Point elasticity measures elasticity at a point on the demand curve. Its formula is:,Ch

29、apter 4,Slide 45,Market Demand,Problems Using Point Elasticity We may need to calculate price elasticity over portion of the demand curve rather than at a single point. The price and quantity used as the base will alter the price elasticity of demand.,Chapter 4,Slide 46,Market Demand,Assume Price in

30、creases from 8$ to $10 quantity demanded falls from 6 to 4 Percent change in price equals: $2/$8 = 25% or $2/$10 = 20% Percent change in quantity equals: -2/6 = -33.33% or -2/4 = -50%,Point Elasticity of Demand (An Example),Chapter 4,Slide 47,Market Demand,Elasticity equals: -33.33/.25 = -1.33 or -.

31、50/.20 = -2.54 Which one is correct?,Point Elasticity of Demand (An Example),Chapter 4,Slide 48,Market Demand,Arc Elasticity of Demand Arc elasticity calculates elasticity over a range of prices Its formula is:,Chapter 4,Slide 49,Market Demand,Arc Elasticity of Demand (An Example),Chapter 4,Slide 50

32、,The Aggregate Demand For Wheat,The demand for U.S. wheat is comprised of domestic demand and export demand.,An Example:,Chapter 4,Slide 51,The Aggregate Demand For Wheat,The domestic demand for wheat is given by the equation: QDD = 1700 - 107P The export demand for wheat is given by the equation: Q

33、DE = 1544 - 176P,Chapter 4,Slide 52,The Aggregate Demand For Wheat,Domestic demand is relatively price inelastic (-0.2), while export demand is more price elastic (-0.4).,Chapter 4,Slide 53,The Aggregate Demand For Wheat,Wheat(million bushels/yr.),Price ($/bushel),0,2,4,6,8,10,12,14,16,18,20,1000,20

34、00,3000,4000,Chapter 4,Slide 54,Consumer Surplus,Consumer Surplus The difference between the maximum amount a consumer is willing to pay for a good and the amount actually paid.,Chapter 4,Slide 55,Consumer Surplus 6 + 5 + 4 + 3 + 2 + 1 = 21,Consumer Surplus,Rock Concert Tickets,Price ($ per ticket),

35、2,3,4,5,6,13,0,1,14,15,16,17,18,19,20,Chapter 4,Slide 56,Consumer Surplus,The stepladder demand curve can be converted into a straight-line demand curve by making the units of the good smaller.,Chapter 4,Slide 57,Consumer Surplus for the Market Demand,Consumer Surplus,Rock Concert Tickets,Price ($ p

36、er ticket),2,3,4,5,6,13,0,1,14,15,16,17,18,19,20,Chapter 4,Slide 58,Consumer Surplus,Combining consumer surplus with the aggregate profits that producers obtain we can evaluate: 1) Costs and benefits of different market structures 2)Public policies that alter the behavior of consumers and firms,Chap

37、ter 4,Slide 59,The Value of Clean Air,Air is free in the sense that we dont pay to breathe it. The Clean Air Act was amended in 1970. Question: Were the benefits of cleaning up the air worth the costs?,An Example:,Chapter 4,Slide 60,The Value of Clean Air,People pay more to buy houses where the air

38、is clean. Data for house prices among neighborhoods of Boston and Los Angeles were compared with the various air pollutants.,Chapter 4,Slide 61,Valuing Cleaner Air,Chapter 4,Slide 62,Network Externalities,Up to this point we have assumed that peoples demands for a good are independent of one another

39、. If fact, a persons demand may be affected by the number of other people who have purchased the good.,Chapter 4,Slide 63,Network Externalities,If this is the case, a network externality exists. Network externalities can be positive or negative.,Chapter 4,Slide 64,Network Externalities,A positive ne

40、twork externality exists if the quantity of a good demanded by a consumer increases in response to an increase in purchases by other consumers. Negative network externalities are just the opposite.,Chapter 4,Slide 65,Network Externalities,The Bandwagon Effect This is the desire to be in style, to ha

41、ve a good because almost everyone else has it, or to indulge in a fad. This is the major objective of marketing and advertising campaigns (e.g. toys, clothing).,Chapter 4,Slide 66,Positive NetworkExternality: Bandwagon Effect,Quantity (thousands per month),Price ($ per unit),Chapter 4,Slide 67,Deman

42、d,Positive NetworkExternality: Bandwagon Effect,Quantity (thousands per month),Price ($ per unit),D20,20,40,60,80,100,D40,D60,D80,D100,The market demand curve is found by joining the points on the individual demand curves. It is relatively more elastic.,Chapter 4,Slide 68,Demand,Positive NetworkExte

43、rnality: Bandwagon Effect,Quantity (thousands per month),Price ($ per unit),D20,20,40,60,80,100,D40,D60,D80,D100,Pure Price Effect,48,Suppose the price falls from $30 to $20. If there were no bandwagon effect, quantity demanded would only increase to 48,000,$20,$30,Chapter 4,Slide 69,Demand,Positive

44、 NetworkExternality: Bandwagon Effect,Quantity (thousands per month),Price ($ per unit),D20,20,40,60,80,100,D40,D60,D80,D100,Pure Price Effect,$20,48,Bandwagon Effect,But as more people buy the good, it becomes stylish to own it and the quantity demanded increases further.,$30,Chapter 4,Slide 70,Net

45、work Externalities,The Snob Effect If the network externality is negative, a snob effect exists. The snob effect refers to the desire to own exclusive or unique goods. The quantity demanded of a “snob” good is higher the fewer the people who own it.,Chapter 4,Slide 71,Negative NetworkExternality: Sn

46、ob Effect,Quantity (thousands per month),Price ($ per unit),Chapter 4,Slide 72,Negative NetworkExternality: Snob Effect,Quantity (thousands per month),2,4,6,8,The demand is less elastic and as a snob good its value is greatly reduced if more people own it. Sales decrease as a result. Examples: Rolex

47、 watches and long lines at the ski lift.,Price ($ per unit),D2,$30,000,$15,000,14,D4,D6,D8,Demand,Pure Price Effect,Snob Effect,Net Effect,Chapter 4,Slide 73,Network Externalities and the Demands for Computers and Fax Machines,Examples of Positive Feedback Externalities Mainframe computers: 1954 - 1

48、965 Microsoft Windows PC operating system Fax-machines and e-mail,Chapter 4,Slide 74,Empirical Estimation of Demand,The most direct way to obtain information about demand is through interviews where consumers are asked how much of a product they would be willing to buy at a given price.,Chapter 4,Sl

49、ide 75,Empirical Estimation of Demand,Problem Consumers may lack information or interest, or be mislead by the interviewer.,Chapter 4,Slide 76,In direct marketing experiments, actual sales offers are posed to potential customers and the responses of customers are observed.,Empirical Estimation of De

50、mand,Chapter 4,Slide 77,The Statistical Approach to Demand Estimation Properly applied, the statistical approach to demand estimation can enable one to sort out the effects of variables on the quantity demanded of a product. “Least-squares” regression is one approach.,Empirical Estimation of Demand,

51、Chapter 4,Slide 78,YearQuantity (Q)Price (P)Income(I),Demand Data for Raspberries,198842410 198972010 199081710 1991131717 1992161017 1993151517 1994191220 199520920 199622520,Chapter 4,Slide 79,Assuming only price determines demand: Q = a - bP Q = 28.2 -1.00P,Empirical Estimation of Demand,Chapter

52、4,Slide 80,Estimating Demand,Quantity,Price,0,5,10,15,20,25,15,10,5,25,20,Chapter 4,Slide 81,Estimating Demand,Adjusting for changes in income,Chapter 4,Slide 82,For the demand equation: Q = a - bP Elasticity:,Empirical Estimation of Demand,Estimating Elasticities,Chapter 4,Slide 83,Assuming: Price

53、& income elasticity are constant The isoelastic demand = The slope, -b = price elasticity of demand Constant, c = income elasticity,Empirical Estimation of Demand,Estimating Elasticities,Chapter 4,Slide 84,Using the Raspberry data: Price elasticity = -0.24 (Inelastic) Income elasticity = 1.46,Empirical Estimation of Demand,Estimating Elasticities,Chapter 4,Slide 85,Substitutes: b2 is posi