文档介绍：Chapter 4
Individual and
Market Demand
1
Chapter 1
Topics to be Discussed
Individual Demand
e and Substitution Effects
Market Demand
Consumer Surplus
2
Chapter 1
Topics to be Discussed
Network Externalities
Empirical Estimation of Demand
3
Chapter 1
Individual Demand
Price Changes
Using the figures developed in the previous chapter, the impact of a change in the price of food can be illustrated using indifference curves.
4
Chapter 1
Effect of a Price Change
Food (units
per month)
Clothing
(units per
month)
4
5
6
U2
U3
A
B
D
U1
4
12
20
Three separate
indifference curves
are tangent to
each budget line.
Assume:
I = $20
PC = $2
PF = $2, $1, $.50
10
5
Chapter 1
Price-Consumption Curve
Effect of a Price 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.
6
Chapter 1
Effect of a Price Change
Demand Curve
Individual Demand relates
the quantity of a good that
a consumer will buy to the
price of that good.
Food (units
per month)
Price
of Food
H
E
G
$
4
12
20
$
$.50
7
Chapter 1
Individual 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
8
Chapter 1
Individual Demand
Two Important Properties of Demand Curves
2) At every point on the demand curve, the consumer is maximizing utility by satisfying the condition that the MRS of food for clothing equals the ratio of the prices of food and clothing.
The Individual Demand Curve
9
Chapter 1
Effect of a Price Change
Food (units
per month)
Price
of Food
H
E
G
$
4
12
20
$
$.50
Demand Curve
E: Pf/Pc = 2/2 = 1 = MRS
G: Pf/Pc = 1/2 = .5 = MRS
H:Pf/Pc = .5/2 = .25 = MRS
When the price falls: Pf/Pc & MRS also fall
10
Chapter 1