CDAE 254 - Class 11 Oct. 2 Last class: 3. Individual demand curves Today: 3. Individual demand curves 4. Market demand and elasticities Quiz 3 (Chapter.

Slides:



Advertisements
Similar presentations
Chapter 5 Some Applications of Consumer Demand, and Welfare Analysis.
Advertisements

 Supply & Demand is really a theory on how buyers and sellers interact with one another, and how prices are determined.
CDAE Class 13 Oct. 9 Last class: Result of Quiz 3 4. Market demand and elasticities Today: 4. Market demand and elasticities Next class: 4.Market.
CDAE Class 15 Oct. 17 Last class: 4. Market demand and elasticity Quiz 4 Today: Result of Quiz 4 Review for the midterm exam Next class: Midterm.
Consumer Equilibrium and Market Demand Chapter 4.
Chapter 6 Market Efficiency and Government Intervention.
Chapter Fifteen Market Demand. From Individual to Market Demand Functions  The market demand curve is the “horizontal sum” of the individual consumers’
1 Demand for Goods & Services One Variable -- Change in Price Other variables constant Another variable changes (not price) Shift in Demand Price of other.
Demand. Laugher Curve Q. What do you get when you cross the Godfather with an economist? A. An offer you can't understand.
Unit 2 – Supply and Demand. Categories Terms / ConceptsDemandSupplyEquilibriumDeterminants
3 - 1 Copyright McGraw-Hill/Irwin, 2002 Markets Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium.
Class 08 Feb. 8 Last class: 2. Review of economic concepts and methods Class experiments to estimate CS Quiz 2 Today: Result of Quiz 2 2. Review of economic.
Demand Chapter 4: Demand.
Section 1 Understanding Demand
CDAE Class 14 Oct. 11 Last class: 4. Market demand and elasticities Class exercise Today: 4. Market demand and elasticities Review for the midterm.
Law of Demand Lecture.
Understanding Demand What is the law of demand?
CDAE Class 10 Sept. 28 Last class: 3. Individual demand curves Today: 3. Individual demand curves Quiz 3 (Sections 3.1 – 3.4) Next class: 3.Individual.
CDAE Class 13 Oct. 10 Last class: 3. Individual demand curves 4. Market demand and elasticity Today: 4. Market demand and elasticity Next class:
CDAE 272 International Economic Development Spring 2008.
Demand and Supply. Starter Key Terms Demand Demand Schedule Demand Curve Law of Demand Market Demand Utility Marginal Utility Substitute Complement Demand.
CDAE Class 18 Oct. 25 Last class: 5. Production functions Today: 5. Production functions 6. Costs Next class: 6.Costs Quiz 5 Important date: Problem.
(Demand, Supply and Market Equilibrium) Chapter 3 Supply and Demand: In Introduction.
Last class: Today: Next class: Important dates: Result of Quiz 2
Demand Defined Demand Graphed Changes in Demand Supply Defined Supply Graphed Changes in Supply Equilibrium Surpluses Shortages Individual Markets: Demand.
Supply and Demand Supply and demand are the two words that economists use most often. Supply and demand are the forces that make market economies work.
Demand  Chapter 4: Demand. Demand  Demand means the willingness and capacity to pay.  Prices are the tools by which the market coordinates individual.
CDAE Class 10 Sept. 27 Last class: 3. Individual demand curves Today: 3. Individual demand curves Class exercise Next class: 3.Individual demand.
Class 20 April 5 Last class: Midterm exam Today: 4. Trade policies of importing nations Next class: Result of the midterm exam 4. Trade policies of importing.
CDAE Class 23 Nov. 13 Last class: Result of Quiz 6 7. Profit maximization and supply Today: 7. Profit maximization and supply 8. Perfectly competitive.
CDAE Class 25 Nov 28 Last class: Result of Quiz 7 7. Profit maximization and supply Today: 7. Profit maximization and supply 8. Perfectly competitive.
CDAE Class 28 Dec 7 Last class: 9. Applying the competitive models Quiz 8 (Chapters 7 and 8) Quiz 9 (optional and take home, due 12:00noon, Friday,
CDAE Class 12 Oct. 4 Last class: 3.Individual demand curves 4.Market demand and elasticities Quiz 3 Today: Result of Quiz 3 4. Market demand and.
CDAE Class 19 Oct. 31 Last class: Result of the midterm exam 5. Production Today: 5. Production 6. Costs Quiz 6 (Sections 5.1 – 5.7) Next class:
CDAE Class 11 Oct. 2 Last class: 2. Review of economic and business concepts Today: 2. Review of economic and business concepts 3. Linear programming.
Microeconomics Pre-sessional September 2015 Sotiris Georganas Economics Department City University London.
Markets Markets – exchanges between buyers and sellers. Supply – questions faced by sellers in those exchanges are related to how much to sell and at.
DEMAND. Variables: Price is the determining factor (the independent variable) Quantity is the dependent variable And “ceteris Paribus”
Supply & Demand The Product Market.
CDAE Class 21 Nov. 6 Last class: Result of Quiz 5 6. Costs Today: 7. Profit maximization and supply Quiz 6 (chapter 6) Next class: 7. Profit maximization.
CDAE Class 25 Nov. 27 Last class: 7. Profit maximization and supply 8. Perfectively competitive markets Quiz 7 (take-home) Today: 8. Perfectly competitive.
CDAE Class 27 Dec. 4 Last class: 8. Perfectively competitive markets 9. Policy analysis Today: 9. Policy analysis Class evaluation Quiz 8 (optional.
CHAPTERS 4-6 SUPPLY & DEMAND Unit III Review. 4.1 Understanding Demand Demand: the desire to own something and the ability to pay for it. The law of demand:
Chapter 4 Demand and Elasticity Concepts Basic Concepts Market Demand Price Elasticity of Demand Cross-price elasticity Income & population elasticity.
CDAE Class 7 Sept. 18 Last class: Result of Quiz 1 2. Preferences and choice Today: 2. Preferences and choice Quiz 2 (Chapter 2) Next class: 3. Individual.
Unit 3 SUPPLY AND DEMAND. Chapter 4 DEMAND  To have demand for a product you must be WILLING and ABLE to purchase the product  WILLING + ABLE = DEMAND.
CDAE Class 17 Oct. 23 Last class: Result of the midterm exam 5. Production functions Today: 5. Production functions Next class: 5.Production functions.
Econ 2301 Dr. Jacobson Mr. Stuckey Week 3 Class 3.
Demand A Schedule Showing the Consumers are Willing and Able to Purchase At a Specified Set of Prices During A Specified Period of Time Amounts of a Good.
CHAPTER 5: BASIC OF DEMAND AND SUPPLY
MBA(Marketing) Msc(Economics) INSRUCTOR:BILAL KHAN.
UNDERSTAND HOW WE GRAPHICALLY REPRESENT CONSUMERS DEMAND A COMPETITIVE MARKET CONSUMER DEMAND.
CDAE 272 International Economic Development Spring 2008.
CDAE Class 14 Oct. 12 Last class: 4. Market demand and elasticity Today: 4. Market demand and elasticity 5. Production Quiz 4 (sections 3.4 – 3.7.
4.1 UNDERSTANDING DEMAND CHAPTER 4 DEMAND.  DEMAND: the desire to own something and the ability to pay for it  Summer Blow Out Sale Summer Blow Out.
© 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Last class: Today: Next class: Readings:
Economics Chapter 4 Review.
Market Demand 3-1 The Law of Demand 3-2 Shifts in the Demand Curve 3-3
Demand Demand is a relationship which shows the various quantities consumers are willing and able to buy of a good at different possible prices of a good.
Economics Chapter 4 Review.
Unit One: Supply and Demand.
Chapter Fifteen Market Demand.
Unit 3: Microeconomics Lesson 1: Demand.
Module 5 Supply and Demand.
Chapter Fifteen Market Demand.
Demand Chapter 4.
SUPPLY Chapter 5.
Market Equilibrium – Consumer and Producer Surplus Graphically, we can identify the areas representing consumer and producer surplus, which.
The Demand Curve and Elasticity of Demand
Presentation transcript:

CDAE Class 11 Oct. 2 Last class: 3. Individual demand curves Today: 3. Individual demand curves 4. Market demand and elasticities Quiz 3 (Chapter 3) Next class: 4. Market demand and elasticities Important dates: Problem set 3: due Thursday, Oct. 4 Midterm exam: Tuesday, Oct. 16

Problem set 3 -- Due at the beginning of class on Thursday, Oct Please use graphical paper to draw graphs -- Please staple all pages together before you turn them in -- Scores on problem sets that do not meet the requirements Problems 3.1., 3.2., 3.3. and 3.4. from the textbook Two more problems: A. Suppose an individual’s demand function is Q = 20 – 0.5P (a) Calculate the consumer surplus (CS) when P = 10 (b) Calculate the change in CS when P increased from 10 to 13 B. Draw a graph and use the graph to explain why many individuals with low income prefer income subsidy over price subsidy. Then explain why many governments use price subsidies rather than income subsidies.

3. Individual demand curves 3.1. Basic concepts 3.2. Demand functions 3.3. Changes in income 3.4. Change in a good’s price 3.5. Change in the price of another good 3.6. Construction of individual demand curves 3.7. Consumer surplus 3.8. Applications

3.7. Consumer surplus and welfare analysis (1) What is consumer surplus (CS)? The extra value individuals receive from consuming a particular amount of a good over what they pay for that. CS = Amount of willingness to pay – actual cost (2) A graphical analysis (Fig. 3.10) (3) Change in CS (4) Applications

Class Exercise (Tuesday, Oct. 2) For demand function Q = P, (a) What is the consumer surplus when the price (P) is equal to $6 per unit? (b) What is the change in consumer surplus when the price increased from $6 to $8

3.8. Applications (1) Income tax vs sales tax (2) Income subsidy vs. price subsidy (3) Change in consumer surplus – a measure of the impacts on consumer welfare due to change in price

4. Market demand and elasticity 4.1. Market demand curves 4.2. A general definition of elasticity 4.3. Price elasticity of demand 4.4. Income elasticity of demand 4.5. Cross-price elasticity of demand 4.6. Empirical studies of demand 4.7. Applications

4.1. Market demand curves (1) Basic concepts Market demand: The total quantity of a good or service demanded by all potential buyers in a market. Market demand curve: A curve that represents the relationship between the total quantity demanded for a good or service and its price, holding all other factors constant.

4.1. Market demand curves (2) Construction of a market demand curve -- A graphical analysis (Fig. 4.1) -- Another definition of a market demand curve: A market demand curve is the horizontal sum of individual demand curves.

4.1. Market demand curves (3) General notations regarding a market: Q = Quantity demanded in a market P = Market price Other factors are held constant

4.1. Market demand curves (4) Shifts in the market demand curve -- A change in individuals’ income -- A change in population -- A change in the price of another good ……

4.2. A general definition of elasticity (1) How to measure the response of demand to a change price? e.g., what will be the change in quantity demanded for a good when its price changes by $1? e.g., what will be the percentage change in quantity demanded for a good when its price changes by 1%?

4.2. A general definition of elasticity (2) Definition of elasticity: The percentage change in one variable (Y) brought about by a 1% change in another variable (X). (3) A mathematical notation: Elasticity of Y with respect to X =

4.2. A general definition of elasticity (4) How to calculate a percentage change? e.g., If X increased from 10 to 12, what is the percentage change in X? Percentage change in X If X decreased from 12 to 10, what is the percentage change in X?

4.2. A general definition of elasticity (5) How to calculate an elasticity? e.g., when X increased from 10 to 12, Y increased from 100 to 110, what is the elasticity of Y with respect to X? Elasticity of Y with respect to X e Y, X = =