范里安中微课件第一章：市场Ch01-The-Market

ChapterOneTheMarketChapterOne1TheTheoryofEconomicsdoesnot

furnishabodyofsettledconclusions

immediatelyapplicabletopolicy.Itis

amethodratherthanadoctrine,an

apparatusofthemind,atechniqueof

thinkingwhichhelpsitspossessorto

drawcorrectconclusions

---JohnMaynardKeynes范里安中微课件第一章：市场Ch01-The-Market2EconomicModelingWhatcauseswhatineconomicsystems?Atwhatlevelofdetailshallwemodelaneconomicphenomenon?Whichvariablesaredeterminedoutsidethemodel(exogenous)andwhicharetobedeterminedbythemodel(endogenous)?EconomicModelingWhatcausesw3ModelingtheApartmentMarketHowareapartmentrentsdetermined?Supposeapartmentsarecloseordistant,butotherwiseidenticaldistantapartmentsrentsareexogenousandknownmanypotentialrentersandlandlordsModelingtheApartmentMarketH4ModelingtheApartmentMarketWhowillrentcloseapartments?Atwhatprice?Willtheallocationofapartmentsbedesirableinanysense?

Howcanweconstructaninsightfulmodeltoanswerthesequestions?ModelingtheApartmentMarketW5EconomicModelingAssumptionsTwobasicpostulates:RationalChoice:Eachpersontriestochoosethebestalternativeavailabletohimorher.Equilibrium:Marketpriceadjustsuntilquantitydemandedequalsquantitysupplied.EconomicModelingAssumptionsT6ModelingApartmentDemandDemand:Supposethemostanyonepersoniswillingtopaytorentacloseapartmentis$500/month.Then p=$500QD=1.Supposethepricehastodropto$490beforea2ndpersonwouldrent.Then p=$490QD=2.ModelingApartmentDemandDeman7ModelingApartmentDemandTheloweristherentalratep,thelargeristhequantityofcloseapartmentsdemanded

pQD

.Thequantitydemandedvs.pricegraphisthemarketdemandcurveforcloseapartments.ModelingApartmentDemandThel8MarketDemandCurveforApartmentspQDMarketDemandCurveforApartm9ModelingApartmentSupplySupply:Ittakestimetobuildmorecloseapartmentssointhisshort-runthequantityavailableisfixed(atsay100).ModelingApartmentSupplySuppl10MarketSupplyCurveforApartmentspQS100MarketSupplyCurveforApartm11CompetitiveMarketEquilibrium“low”rentalpricequantitydemandedofcloseapartmentsexceedsquantityavailablepricewillrise.“high”rentalpricequantitydemandedlessthanquantityavailablepricewillfall.CompetitiveMarketEquilibrium12CompetitiveMarketEquilibriumQuantitydemanded=quantityavailable

pricewillneitherrisenorfallsothemarketisatacompetitiveequilibrium.CompetitiveMarketEquilibrium13CompetitiveMarketEquilibriumpQD,QS100CompetitiveMarketEquilibrium14CompetitiveMarketEquilibriumpQD,QSpe100CompetitiveMarketEquilibrium15CompetitiveMarketEquilibriumpQD,QSpe100Peoplewillingtopaypeforcloseapartmentsgetcloseapartments.CompetitiveMarketEquilibrium16CompetitiveMarketEquilibriumpQD,QSpe100Peoplewillingtopaypeforcloseapartmentsgetcloseapartments.Peoplenotwillingtopay

peforcloseapartments

getdistantapartments.CompetitiveMarketEquilibrium17CompetitiveMarketEquilibriumQ:Whorentsthecloseapartments?A:Thosemostwillingtopay.Q:Whorentsthedistantapartments?A:Thoseleastwillingtopay.Sothecompetitivemarketallocationisby“willingness-to-pay”.CompetitiveMarketEquilibrium18ComparativeStaticsWhatisexogenousinthemodel?priceofdistantapartmentsquantityofcloseapartmentsincomesofpotentialrenters.Whathappensiftheseexogenousvariableschange?ComparativeStaticsWhatisexo19ComparativeStaticsSupposethepriceofdistantapartmentrises.Demandforcloseapartmentsincreases(rightwardshift),causingahigherpriceforcloseapartments.ComparativeStaticsSupposethe20MarketEquilibriumpQD,QSpe100MarketEquilibriumpQD,QSpe10021MarketEquilibriumpQD,QSpe100HigherdemandMarketEquilibriumpQD,QSpe100H22MarketEquilibriumpQD,QSpe100Higherdemandcauseshigher

marketprice;samequantity

traded.MarketEquilibriumpQD,QSpe100H23ComparativeStaticsSupposethereweremorecloseapartments.Supplyisgreater,sothepriceforcloseapartmentsfalls.ComparativeStaticsSupposethe24MarketEquilibriumpQD,QSpe100MarketEquilibriumpQD,QSpe10025MarketEquilibriumpQD,QS100HighersupplypeMarketEquilibriumpQD,QS100Hig26MarketEquilibriumpQD,QSpe100Highersupplycausesa

lowermarketpriceanda

largerquantitytraded.MarketEquilibriumpQD,QSpe100H27ComparativeStaticsSupposepotentialrenters’incomesrise,increasingtheirwillingness-to-payforcloseapartments.Demandrises(upwardshift),causinghigherpriceforcloseapartments.ComparativeStaticsSupposepot28MarketEquilibriumpQD,QSpe100MarketEquilibriumpQD,QSpe10029MarketEquilibriumpQD,QSpe100Higherincomescause

higherwillingness-to-payMarketEquilibriumpQD,QSpe100H30MarketEquilibriumpQD,QSpe100Higherincomescause

higherwillingness-to-pay,

highermarketprice,and

thesamequantitytraded.

MarketEquilibriumpQD,QSpe100H31TaxationPolicyAnalysisLocalgovernmenttaxesapartmentowners.Whathappenstopricequantityofcloseapartmentsrented?Isanyofthetax“passed”torenters?TaxationPolicyAnalysisLocal32TaxationPolicyAnalysisMarketsupplyisunaffected.Marketdemandisunaffected.Sothecompetitivemarketequilibriumisunaffectedbythetax.Priceandthequantityofcloseapartmentsrentedarenotchanged.Landlordspayallofthetax.TaxationPolicyAnalysisMarket33ImperfectlyCompetitiveMarketsAmongstmanypossibilitiesare:amonopolisticlandlordaperfectlydiscriminatorymonopolisticlandlordacompetitivemarketsubjecttorentcontrol.ImperfectlyCompetitiveMarket34AMonopolisticLandlordWhenthelandlordsetsarentalpricepherentsD(p)apartments.Revenue=pD(p).Revenueislowifp

0RevenueislowifpissohighthatD(p)0.Anintermediatevalueforpmaximizesrevenue.AMonopolisticLandlordWhenth35MonopolisticMarketEquilibriumpQDLow

priceLowprice,highquantity

demanded,lowrevenue.MonopolisticMarketEquilibriu36MonopolisticMarketEquilibriumpQDHigh

priceHighprice,lowquantity

demanded,lowrevenue.MonopolisticMarketEquilibriu37MonopolisticMarketEquilibriumpQDMiddle

priceMiddleprice,mediumquantity

demanded,largerrevenue.MonopolisticMarketEquilibriu38MonopolisticMarketEquilibriumpQD,QSMiddle

priceMiddleprice,mediumquantity

demanded,largerrevenue.

Monopolistdoesnotrentallthe

closeapartments.100MonopolisticMarketEquilibriu39MonopolisticMarketEquilibriumpQD,QSMiddle

priceMiddleprice,mediumquantity

demanded,largerrevenue.

Monopolistdoesnotrentallthe

closeapartments.100Vacantcloseapartments.MonopolisticMarketEquilibriu40PerfectlyDiscriminatoryMonopolisticLandlordImaginethemonopolistkneweveryone’swillingness-to-pay.Charge$500tothemostwilling-to-pay,charge$490tothe2ndmostwilling-to-pay,etc.PerfectlyDiscriminatoryMonop41DiscriminatoryMonopolisticMarketEquilibriumpQD,QS100p1=$5001DiscriminatoryMonopolisticMa42DiscriminatoryMonopolisticMarketEquilibriumpQD,QS100p1=$500p2=$49012DiscriminatoryMonopolisticMa43DiscriminatoryMonopolisticMarketEquilibriumpQD,QS100p1=$500p2=$49012p3=$4753DiscriminatoryMonopolisticMa44DiscriminatoryMonopolisticMarketEquilibriumpQD,QS100p1=$500p2=$49012p3=$4753DiscriminatoryMonopolisticMa45DiscriminatoryMonopolisticMarketEquilibriumpQD,QS100p1=$500p2=$49012p3=$4753peDiscriminatorymonopolist

chargesthecompetitivemarket

pricetothelastrenter,and

rentsthecompetitivequantity

ofcloseapartments.DiscriminatoryMonopolisticMa46RentControlLocalgovernmentimposesamaximumlegalprice,pmax<pe,thecompetitiveprice.RentControlLocalgovernmenti47MarketEquilibriumpQD,QSpe100MarketEquilibriumpQD,QSpe10048MarketEquilibriumpQD,QSpe100pmaxMarketEquilibriumpQD,QSpe100p49MarketEquilibriumpQD,QSpe100pmaxExcessdemandMarketEquilibriumpQD,QSpe100p50MarketEquilibriumpQD,QSpe100pmaxExcessdemandThe100closeapartmentsarenolongerallocatedby

willingness-to-pay(lottery,lines,

largefamiliesfirst?).MarketEquilibriumpQD,QSpe100p51WhichMarketOutcomesAreDesirable?Whichisbetter?RentcontrolPerfectcompetitionMonopolyDiscriminatorymonopolyWhichMarketOutcomesAreDesi52ParetoEfficiencyVilfredoPareto;1848-1923.AParetooutcomeallowsno“wastedwelfare”;i.e.theonlywayoneperson’swelfarecanbeimprovedisnottoloweranotherperson’swelfare.ParetoEfficiencyVilfredoPare53ParetoEfficiencyJillhasanapartment;Jackdoesnot.Jillvaluestheapartmentat$200;Jackwouldpay$400forit.JillcouldsublettheapartmenttoJackfor$300.Bothgain,soitwasParetoinefficientforJilltohavetheapartment.ParetoEfficiencyJillhasana54ParetoEfficiencyAParetoinefficientoutcomemeansthereremainunrealizedmutualgains-to-trade.Anymarketoutcomethatachievesallpossiblegains-to-trademustbeParetoefficient.ParetoEfficiencyAParetoinef55ParetoEfficiencyCompetitiveequilibrium:allcloseapartmentrentersvaluethematthemarketpricepeormoreallothersvaluecloseapartmentsatlessthanpesonomutuallybeneficialtradesremainsotheoutcomeisParetoefficient.ParetoEfficiencyCompetitivee56ParetoEfficiencyDiscriminatoryMonopoly:assignmentofapartmentsisthesameaswiththeperfectlycompetitivemarketsothediscriminatorymonopolyoutcomeisalsoParetoefficient.ParetoEfficiencyDiscriminator57ParetoEfficiencyMonopoly:notallapartmentsareoccupiedsoadistantapartmentrentercouldbeassignedacloseapartmentandhavehigherwelfarewithoutloweringanybodyelse’swelfare.sothemonopolyoutcomeisParetoinefficient.ParetoEfficiencyMonopoly:58ParetoEfficiencyRentControl:somecloseapartmentsareassignedtorentersvaluingthematbelowthecompetitivepricepesomerentersvaluingacloseapartmentabovepedon’tgetcloseapartmentsParetoinefficientoutcome.ParetoEfficiencyRentControl:59HarderQuestionsOvertime,willthesupplyofcloseapartmentsincrease?rentcontroldecreasethesupplyofapartments?amonopolistsupplymoreapartmentsthanacompetitiverentalmarket?HarderQuestionsOvertime,wil60ChapterOneTheMarketChapterOne61TheTheoryofEconomicsdoesnot

furnishabodyofsettledconclusions

immediatelyapplicabletopolicy.Itis

amethodratherthanadoctrine,an

apparatusofthemind,atechniqueof

thinkingwhichhelpsitspossessorto

drawcorrectconclusions

---JohnMaynardKeynes范里安中微课件第一章：市场Ch01-The-Market62EconomicModelingWhatcauseswhatineconomicsystems?Atwhatlevelofdetailshallwemodelaneconomicphenomenon?Whichvariablesaredeterminedoutsidethemodel(exogenous)andwhicharetobedeterminedbythemodel(endogenous)?EconomicModelingWhatcausesw63ModelingtheApartmentMarketHowareapartmentrentsdetermined?Supposeapartmentsarecloseordistant,butotherwiseidenticaldistantapartmentsrentsareexogenousandknownmanypotentialrentersandlandlordsModelingtheApartmentMarketH64ModelingtheApartmentMarketWhowillrentcloseapartments?Atwhatprice?Willtheallocationofapartmentsbedesirableinanysense?

Howcanweconstructaninsightfulmodeltoanswerthesequestions?ModelingtheApartmentMarketW65EconomicModelingAssumptionsTwobasicpostulates:RationalChoice:Eachpersontriestochoosethebestalternativeavailabletohimorher.Equilibrium:Marketpriceadjustsuntilquantitydemandedequalsquantitysupplied.EconomicModelingAssumptionsT66ModelingApartmentDemandDemand:Supposethemostanyonepersoniswillingtopaytorentacloseapartmentis$500/month.Then p=$500QD=1.Supposethepricehastodropto$490beforea2ndpersonwouldrent.Then p=$490QD=2.ModelingApartmentDemandDeman67ModelingApartmentDemandTheloweristherentalratep,thelargeristhequantityofcloseapartmentsdemanded

pQD

.Thequantitydemandedvs.pricegraphisthemarketdemandcurveforcloseapartments.ModelingApartmentDemandThel68MarketDemandCurveforApartmentspQDMarketDemandCurveforApartm69ModelingApartmentSupplySupply:Ittakestimetobuildmorecloseapartmentssointhisshort-runthequantityavailableisfixed(atsay100).ModelingApartmentSupplySuppl70MarketSupplyCurveforApartmentspQS100MarketSupplyCurveforApartm71CompetitiveMarketEquilibrium“low”rentalpricequantitydemandedofcloseapartmentsexceedsquantityavailablepricewillrise.“high”rentalpricequantitydemandedlessthanquantityavailablepricewillfall.CompetitiveMarketEquilibrium72CompetitiveMarketEquilibriumQuantitydemanded=quantityavailable

pricewillneitherrisenorfallsothemarketisatacompetitiveequilibrium.CompetitiveMarketEquilibrium73CompetitiveMarketEquilibriumpQD,QS100CompetitiveMarketEquilibrium74CompetitiveMarketEquilibriumpQD,QSpe100CompetitiveMarketEquilibrium75CompetitiveMarketEquilibriumpQD,QSpe100Peoplewillingtopaypeforcloseapartmentsgetcloseapartments.CompetitiveMarketEquilibrium76CompetitiveMarketEquilibriumpQD,QSpe100Peoplewillingtopaypeforcloseapartmentsgetcloseapartments.Peoplenotwillingtopay

peforcloseapartments

getdistantapartments.CompetitiveMarketEquilibrium77CompetitiveMarketEquilibriumQ:Whorentsthecloseapartments?A:Thosemostwillingtopay.Q:Whorentsthedistantapartments?A:Thoseleastwillingtopay.Sothecompetitivemarketallocationisby“willingness-to-pay”.CompetitiveMarketEquilibrium78ComparativeStaticsWhatisexogenousinthemodel?priceofdistantapartmentsquantityofcloseapartmentsincomesofpotentialrenters.Whathappensiftheseexogenousvariableschange?ComparativeStaticsWhatisexo79ComparativeStaticsSupposethepriceofdistantapartmentrises.Demandforcloseapartmentsincreases(rightwardshift),causingahigherpriceforcloseapartments.ComparativeStaticsSupposethe80MarketEquilibriumpQD,QSpe100MarketEquilibriumpQD,QSpe10081MarketEquilibriumpQD,QSpe100HigherdemandMarketEquilibriumpQD,QSpe100H82MarketEquilibriumpQD,QSpe100Higherdemandcauseshigher

marketprice;samequantity

traded.MarketEquilibriumpQD,QSpe100H83ComparativeStaticsSupposethereweremorecloseapartments.Supplyisgreater,sothepriceforcloseapartmentsfalls.ComparativeStaticsSupposethe84MarketEquilibriumpQD,QSpe100MarketEquilibriumpQD,QSpe10085MarketEquilibriumpQD,QS100HighersupplypeMarketEquilibriumpQD,QS100Hig86MarketEquilibriumpQD,QSpe100Highersupplycausesa

lowermarketpriceanda

largerquantitytraded.MarketEquilibriumpQD,QSpe100H87ComparativeStaticsSupposepotentialrenters’incomesrise,increasingtheirwillingness-to-payforcloseapartments.Demandrises(upwardshift),causinghigherpriceforcloseapartments.ComparativeStaticsSupposepot88MarketEquilibriumpQD,QSpe100MarketEquilibriumpQD,QSpe10089MarketEquilibriumpQD,QSpe100Higherincomescause

higherwillingness-to-payMarketEquilibriumpQD,QSpe100H90MarketEquilibriumpQD,QSpe100Higherincomescause

higherwillingness-to-pay,

highermarketprice,and

thesamequantitytraded.

MarketEquilibriumpQD,QSpe100H91TaxationPolicyAnalysisLocalgovernmenttaxesapartmentowners.Whathappenstopricequantityofcloseapartmentsrented?Isanyofthetax“passed”torenters?TaxationPolicyAnalysisLocal92TaxationPolicyAnalysisMarketsupplyisunaffected.Marketdemandisunaffected.Sothecompetitivemarketequilibriumisunaffectedbythetax.Priceandthequantityofcloseapartmentsrentedarenotchanged.Landlordspayallofthetax.TaxationPolicyAnalysisMarket93ImperfectlyCompetitiveMarketsAmongstmanypossibilitiesare:amonopolisticlandlordaperfectlydiscriminatorymonopolisticlandlordacompetitivemarketsubjecttorentcontrol.ImperfectlyCompetitiveMarket94AMonopolisticLandlordWhenthelandlordsetsarentalpricepherentsD(p)apartments.Revenue=pD(p).Revenueislowifp

0RevenueislowifpissohighthatD(p)0.Anintermediatevalueforpmaximizesrevenue.AMonopolisticLandlordWhenth95MonopolisticMarketEquilibriumpQDLow

priceLowprice,highquantity

demanded,lowrevenue.MonopolisticMarketEquilibriu96MonopolisticMarketEquilibriumpQDHigh

priceHighprice,lowquantity

demanded,lowrevenue.MonopolisticMarketEquilibriu97MonopolisticMarketEquilibriumpQDMiddle

priceMiddleprice,mediumquantity

demanded,largerrevenue.MonopolisticMarketEquilibriu98MonopolisticMarketEquilibriumpQD,QSMiddle

priceMiddleprice,mediumquantity

demanded,largerrevenue.

Monopolistdoesnotrentallthe

closeapartments.100MonopolisticMarketEquilibriu99MonopolisticMarketEquilibriumpQD,QSMiddle

priceMiddleprice,mediumquantity

demanded,largerrevenue.

Monopolistdoesnotrentallthe

closeapartments.100Vacantcloseapartments.MonopolisticMarketEquilibriu100PerfectlyDiscriminatoryMonopolisticLandlordImaginethemonopolistkneweveryone’swillingness-to-pay.Charge$500tothemostwilling-to-pay,charge$490tothe2ndmostwilling-to-pay,etc.PerfectlyDiscriminatoryMonop101DiscriminatoryMonopolisticMarketEquilibriumpQD,QS100p1=$5001DiscriminatoryMonopolisticMa102DiscriminatoryMonopolisticMarketEquilibriumpQD,QS100p1=$500p2=$49012DiscriminatoryMonopolisticMa103DiscriminatoryMonopolisticMarketEquilibriumpQD,QS100p1=$500p2=$49012p3=$4753DiscriminatoryMonopolisticMa104DiscriminatoryMonopolisticMarketEquilibriumpQD,QS100p1=$500p2=$49012p3=$4753DiscriminatoryMonopolisticMa105DiscriminatoryMonopolisticMarketEquilibriumpQD,QS100p1=$500p2=$49012p3=$4753peDiscriminatorymonopolist

chargesthecompetitivemarket

pricetothelastrenter,and

rentsthecompetitivequantity

ofcloseapartments.DiscriminatoryMonopolisticMa106RentControlLocalgovernmentimposesamaximumlegalprice,pmax<pe,thecompetitiveprice.RentControlLocalgovernmenti107MarketEquilibriumpQD,QSpe100MarketEquilibriumpQD,QSpe100108MarketEquilibriumpQD,QSpe100pmaxMarketEquilibriumpQD,QSpe100p109MarketEquilibriumpQD,QSpe100pmaxExcessdemandMarketEquilibriumpQD,QSpe100p110MarketEquilibriumpQD,QSpe100pmaxExcessdemandThe100closeapartmentsarenolongerallocatedby

willingness-to-pay(lottery,lines,

largefamiliesfirst?).MarketEquil