文档介绍：Chapter Fifteen
Market Demand
From Individual to Market Demand Functions
Think of an economy containing n consumers, denoted by i = 1, …,n.
Consumer i’s ordinary demand function modity j is
From Individual to Market Demand Functions
When all consumers are price-takers, the market demand function modity j is
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
Elasticity measures the “sensitivity” of one variable with respect to another.
The elasticity of variable X with respect to variable Y is
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 modity’s own price?
A: Because the value of sensitivity then depends upon the (arbitrary) units of measurement used for quantity demanded.
Arc and Point Elasticities
An “average” own-price elasticity of demand modity i over an interval of values for pi is an arc-elasticity, puted by a mid-point formula.
puted for a single value of pi is a point elasticity.
Arc Own-Price Elasticity
pi
Xi*
pi’
pi’+h
pi’-h
What is the “average” own-price elasticity of demand for prices in an interval centered on pi’?
Point Own-Price Elasticity
pi
Xi*
pi’
pi’+h
pi’-h
What is the own-price elasticity of demand in a very small interval of prices centered on pi’?
As h ® 0,