【文章內(nèi)容簡介】 69。2020 Pearson Education, Inc. Chapter 4 45 Price Elasticity of Demand ?Isoelastic Demand ?When price elasticity of demand is constant along the entire demand curve ?Demand curve is bowed inward (not linear) 169。2020 Pearson Education, Inc. Chapter 4 46 The Aggregate Demand for Wheat ?The demand for US wheat is prised of two ponents: ?Domestic demand ?Export demand ?Total demand for wheat can be obtained by aggregating these two demands 169。2020 Pearson Education, Inc. Chapter 4 47 The Aggregate Demand for Wheat ?The domestic demand for wheat is given by the equation: ?QDD = 1465 88P ?The export demand for wheat is given by the equation: ?QDE = 1344 138P 169。2020 Pearson Education, Inc. Chapter 4 48 The Aggregate Demand for Wheat ?Domestic demand is relatively price inelastic (Ed = ) ?Export demand is more price elastic (Ed = ) ?Poorer countries that import US wheat turn to other grains and food if wheat prices increase 169。2020 Pearson Education, Inc. Chapter 4 49 C D Export Demand Total world demand is the horizontal sum of the domestic demand AB and export demand CD. F Total Demand A B Domestic Demand E The Aggregate Demand for Wheat Wheat Price 0 10 16 18 Above C, export demand is zero, so domestic demand = total demand = AE segment 169。2020 Pearson Education, Inc. Chapter 4 50 Consumer Surplus ?Consumers buy goods because it makes them better off ?Consumer Surplus measures how much better off they are 169。2020 Pearson Education, Inc. Chapter 4 51 Consumer Surplus ?Consumer Surplus ?The difference between the maximum amount a consumer is willing to pay for a good and the amount actually paid ?Can calculate consumer surplus from the demand curve 169。2020 Pearson Education, Inc. Chapter 4 52 Consumer Surplus Example ?Student wants to buy concert tickets ?Demand curve tells us willingness to pay for each concert ticket ?1st ticket worth $20 but price is $14 so student generates $6 worth of surplus ?Can measure this for each ticket ?Total surplus is addition of surplus for each ticket purchased 169。2020 Pearson Education, Inc. Chapter 4 53 The consumer surplus of purchasing 6 concert tickets is the sum of the surplus derived from each one individually. Consumer Surplus 6 + 5 + 4 + 3 + 2 + 1 = 21 Consumer Surplus Example Rock Concert Tickets Price ($ per ticket) 2 3 4 5 6 13 0 1 14 15 16 17 18 19 20 Market Price Will not buy more than 7 because surplus is negative 169。2020 Pearson Education, Inc. Chapter 4 54 Consumer Surplus ?The stepladder demand curve can be converted into a straightline demand curve by making the units of the good smaller ?Consumer surplus is the area under the demand curve and above the price 169。2020 Pearson Education, Inc. Chapter 4 55 Demand Curve Consumer Surplus Consumer Surplus for the Market Demand Consumer Surplus Rock Concert Tickets Price ($ per ticket) 2 3 4 5 6 13 0 1 Actual Expenditure 14 15 16 17 18 19 20 Market Price CS = 189。 ($20 $14)*(1600) = $19,500 169。2020 Pearson Education, Inc. Chapter 4 56 Applying 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 169。2020 Pearson Education, Inc. Chapter 4 57 Applying Consumer Surplus – An Example ?The Value of Clean Air ?Air is free in the sense that we don’t pay to breathe it ?The Clean Air Act was amended in 1970 ?Question: Were the benefits of cleaning up the air worth the costs? 169。2020 Pearson Education, Inc. Chapter 4 58 The Value of Clean Air ?Empirical data determined estimates for the demand for clean air ?No market exists for clean air, but can see people are willing to pay for it ?Ex: People pay more to buy houses where the air is clean 169。2020 Pearson Education, Inc. Chapter 4 59 The Value of Cleaner Air ?Using these empirical estimates, we can measure people’s consumer surplus for pollution reduction from the demand curve 169。2020 Pearson Education, Inc. Chapter 4 60 The shaded area represents the consumer surplus generated when air pollution is reduced by 5 parts per 100 million of nitrous oxide at a cost of $1000 per part reduced. Valuing Cleaner Air 2020 10 0 1000 5 A NOX (pphm) Pollution Reduction Value 169。2020 Pearson Education, Inc. Chapter 4 61 Value of Cleaner Air ?A full costbenefit analysis would include total benefit of cleanup ?Total benefits would be pared to total costs to determine if the clean up was worthwhile 169。2020 Pearson Education, Inc. Chapter 4 62 Network Externalities ?Up to this point we have assumed that people’s demands for a good are independent of one another ?For some goods, one person’s demand also depends on the demands of other people 169。2020 Pearson Education, Inc. Chapter 4 63 Network Externalities ?If this is the case, a work externality exists ?Network externalities can be positive or negative 169。2020 Pearson Education, Inc. Chapter 4 64 Network Externalities ?A positive work externality exists if the quantity of a good demanded by a consumer increases in response to an increase in purchases by other consumers ?Negative work externalities are just the opposite 169。2020 Pearson Education, Inc. Chapter 4 65 Network Externalities ?The Bandwagon Effect ?This is the desire to be in style, to have a good because almost everyone else has it, or to indulge in a fad ?This is the major objective of marketing and advertising campaigns (. toys, clothing) ?Positive work externality in which a consumer wishes to possess a good in pa