中级微观经济学(中山大学).ppt

1、MICROECONOMICSClassroom Lecture Notes (3 credits, as of 2004),based on Hal R. Varians Intermediate Microeconomics, Sixth Edition, referring to Pindyck and Rubinfelds Microeconomics, Fourth Edition.,Chapter 0,Economics,The source of all economic problems is scarcity.,Problem of trade-off, and choice.

2、 Economics, as a way of thinking, as a dismal science. Problems - solutions - hidden consequences.,Main decision-making agents:,1 individuals (household), 2 firms, and 3 governments.,Objects of economic choice are commodities, including goods and services.,Main economic activities:,Consumption, Prod

3、uction, and Exchange.,Microeconomics and macroeconomics:,to show the market mechanism (the invisible hand), to supplement it.,The circular flow of economic activities.,product market factor market,The product market and the factor market.,The market relation is mutual and voluntary. Positive issues

4、and normative issues.,Marginal analysis,Relations between Total magnitudes, Average magnitudes, and Marginal magnitudes.,1, MM is the slope of the TM curve; 2, AM is the slope of the ray from the origin to the point at the TM curve;,TM,MM(x*),AM(x*),x*,x,3, TM increasing (decreasing) if and only if

5、MM 0 ( MM 0 ); 4, If TM is at maximum or minimum, then MM = 0;,5, AM increasing (decreasing) if and only if MM AM ( MM AM ); 6, If AM is at maximum or minimum, then MM = AM, or MM cuts AM at the latters maximum or minimum.,Chapter 1,The Market,Economics proceeds by developing Models of social phenom

6、ena. By a model we mean a simplified representation of reality.,Exogenous variables: taken as determined by factors not discussed in a model.,Endogenous variables: determined by forces described in the model.,The optimization principle:,People try to choose whats best for them.,The equilibrium princ

7、iple:,Prices adjust until demand and supply are equal.,The demand curve:,A curve that relates the quantity demanded to price.,The reservation price:,Ones maximum willingness to pay for something.,From peoples reservation prices to the demand curve.,Similarly, the supply curve.,Fig.,Pareto efficiency

8、:,A concept to evaluate different ways of allocating resources.,A Pareto improvement is a change to make some people better off without hurting anybody else.,An economic situation is Pareto efficient or Pareto optimal if there is already no way to make any more Pareto improvement.,Short run and long

9、 run,Equilibria in the short run (some factors are unchanged) and in the long run.,Chapter 2,Budget Constraint,* Vector variables and vector functions. * The inner product of two vectors. * With the price vectorp = ( p1, , pn ), the value of the commodity bundle x = ( x1, , xn ) is pTx = i pixi.,How

10、ever, two goods are often enough to discuss.,The budget constraint: p1 x1 + p2 x2 m.,The budget line and the budget set (the market opportunity set).,The slope of the budget line: d x2 /d x1 = p1 / p2 .,How the budget line moves when the income changes, or when a price changes.,x2,x1,Budget set,Budg

11、et line Slope = -p1/p2,m/p2,m/p1,Budget line and budget set,x2,x1,Budget line,Slope = - p1/p2,m/p2,m/p2,m/p1,m/p1,Increasing income,Slope = - p1/p2,m/p2,Budget line,Slope = - p1/p2,m/p1,m/p1,Increasing price,A subsidy is the opposite of a quantity tax.,Taxes, quantity taxes, value taxes (ad valorem

12、taxes), and lump-sum taxes.,Rationing.,Their effects on the budget set.,Chapter 3,Preferences,* Prerequisite: A binary relation R on X is said to be Complete if xRy or yRx for any pair of x and y in X; Reflexive if xRx for any x in X; Transitive if xRy and yRz imply xRz.,Rational agents and stable p

13、references,Bundle x is strictly preferred (s.p.), or weakly preferred (w.p.), or indifferent (ind.), to Bundle y. (If x is w.p. to y and y is w.p. to x, we say x is indifferent to y.),Assumptions about Preferences,Completeness: x is w.p. to y or y is w.p. to x for any pair of x and y.,Reflexivity: x

14、 is w.p. to x for any bundle x.,Transitivity: If x is w.p. to y and y is w.p. to z, then x is w.p. to z.,The indifference sets, the indifference curves.,They cannot cross each other.,Fig.,indifference curves,x2,x1,Perfect substitutes and perfect complements. Goods, bads, and neutrals. Satiation. Fig

15、s,Blue pencils,Red pencils,Indifference curves,Perfect substitutes,Perfect complements,Indifference curves,Left shoes,Right shoes,Well-behaved preferences are monotonic (meaning more is better) and convex (meaning average are preferred to extremes). Figs,x2,x1,Better bundles,(x1, x2),Monotonicity,Be

16、tter bundles,The marginal rate of substitution (MRS) measures the slope of the indifference curve. MRS = d x2 / d x1, the marginal willingness to pay ( how much to give up of x2 to acquire one more of x1 ). Usually negative. Fig,Convex indifference curves exhibit a diminishing marginal rate of subst

17、itution. Fig.,x2,x1,Convexity,Averaged bundle,(y1,y2),(x1,x2),Chapter 4,Utility,(as a way to describe preferences),Utilities,Essential ordinal utilities,versus convenient cardinal utility functions.,Cardinal utility functions: u ( x ) u ( y ) if and only if bundle x is w.p. to bundle y. The indiffer

18、ence curves are the projections of contours of u = u ( x1, x2 ). Fig.,Utility functions are indifferent up to any strictly increasing transformation. Constructing a utility function in the two-commodity case of well-behaved preferences: Draw a diagonal line and label each indifference curve with how

19、 far it is from the origin.,Examples of utility functions,u (x1, x2) = x1 x2 ; u (x1, x2) = x12 x22 ; u (x1, x2) = ax1 + bx2 (perfect substitutes); u (x1, x2) = minax1, bx2 (perfect complements).,Quasilinear preferences: All indifference curves are vertically (or horizontally) shifted copies of a si

20、ngle one, for example u (x1, x2) = v (x1) + x2 .,Cobb-Douglas preferences: u (x1, x2) = x1c x2d , or u (x1, x2) = x1ax21-a ; and their log equivalents: u (x1, x2) = c ln x + d ln x2 , or u (x1, x2) = a ln x + (1 a) ln x2,Cobb-Douglas,MRS along an indifference curve. Derive MRS = MU1 / MU2 by taking

21、total differential along any indifference curve.,Marginal utilities MU1 and MU2.,Marginal analysis,MM is the slope of the TM curve,AM is the slope of the ray from the origin to the point at the TM curve.,500,490,480,The demand curve,Reservation price,Number of apartment,From peoples reservation pric

22、es to the market demand curve.,supply,Demand,P,Q,Equilibrium,P*,Q*,E (P*,Q*),supply,Demand,p,q,E,Equilibrium,x2,x1,Budget line,Budget set,Rationing,R*,Market opportunity,MRS,Indifference curve,Slope = dx2/dx1,x2,x1,dx2,dx1,Chapter 5,Choice of consumption,Optimal choice is at the point in the budget

23、line with highest utility. The tangency solution of an indifferent curve and the budget line: MRS = p1 / p2. Fig.,Basic equations: MU1 / p1 = MU2 / p2 and p1 x1 + p2 x2 = m. Figs. ( How if negative solutions.),Interior solutions, and Boundary (Corner) solutions. Kinky tastes. Figs.,Three approaches

24、to the basic equations: Graphically; As-one-variable; *Lagrangian.,The optimal choice is the consumers demanded bundle. The demand function.,Examples: perfect substitutes, perfect complements, neutrals and bads, concave preferences. Figs.,Cobb-Douglas demand functions. * Choosing taxes. (By *Slutsky

25、 decomposition.) Figs.,Chapter 6,Demand,Demand functions: x1 = x1 (p1, p2, m), x2 = x2 (p1, p2, m).,Normal and inferior goods (by income); Fig. Luxury and necessary goods (by income). Fig. Ordinary and Giffen goods (by price). Fig.,The income expansion path or the income offer curves, and the Engel

26、curve. Figs.,The price offer curve and the Demand curve. Figs.,Substitutes and complements. Cobb-Douglas preferences. Quasilinear preferences.,* Homothetic preferences: if (x1, x2) is preferred to (y1, y2), then (tx1, tx2) is preferred to (ty1, ty2) for any t 0. Thus both the income offer curves and

27、 the Engel curves are all rays through the origin.,Example: Quasilinear preferences lead to vertical (horizontal) income offer curves and vertical (horizontal) Engel curves.,Chapter 8,Slutsky Equation,How the optimum moves when the price of a good changes?,Decomposition: the total effect = the subst

28、itution effect + the income effect. p139,The pivot gives the substitution effect, the shift gives the income effect. P103andp137,Slutsky identity, pivoting the budget line around the original choice. Fig. Hicks decomposition, pivoting the budget line around the indifference curve. Fig.,Chapter 9,Buy

29、ing and Selling for a consumer with an endowment ,x1,x1,x2,p1,1,1,Net and gross demands, net supply. Offer curve and demand curve.p164,Labor supply p174,$,Leisure R,Labor,W,Leisure,E,Chapter 10,Intertemporal Choice,Suppose for example in a 3-period model, the consumption is ck and the interest rate

30、is rk in period k, then the present value of the consumptions is c1 + c2 / (1+r1) + c3 / (1+r1) (1+r2). p190,Chapter 12,Uncertainty,Utilities and probabilities.,Expected utility functions, or von Neumann-Morgenstern utility functions. They are indifferent up to any positive affine transformation. (a

31、ffine transformation: y = a + bx).,Risk aversion and risk loving.,Concave vs convex utility.,The second derivatives.,$,$,U,U,Chapter 14,Consumers surplus,1 2 3 4 5 6,p,r1,r2,r3,r4,r5,r6,Consumers Surplus p250,消费者得益,总收益,Producers surplus p259,Producers surplus,Supply curve,Q,P*,Q*,P,Q,Supply curve,Ch

32、ange in producers surplus,R,T,Q,Q,P,P,P,The water-diamond paradox,Pd Pw,Q,Calculating gains and losses,Change in consumers surplus,B,T,Chapter 15 Market Demand,One can think of the market demand as the demand of some “representative consumer”.,Adding up demand curves: The horizontal summation princi

33、ple.,+,=,Horizontal summation,PRICE,DEMAND CURVE,D(p),QUANTITY,It is the sum of the individual demand curve,The market demand curve,The price elasticity of demand:= (q / q ) / (p / p) = ( p / q ) / (p /q), or= ( d q / q ) / ( d p / p) = ( p / q ) / ( d p / d q) = slope of ray / slope of curve .,A go

34、od has an elastic ( inelastic, unitary) demand if | 1 ( | 1 , | = 1 ).,Elasticity and revenue. R = pq, R = qp + pq , and then R/ p = q 1 +(p) where ( p ) = ( pq ) / (qp).,QUANTITY,PRICE,a /2,a / 2b,=, 1, =1, 1, =0,The elasticity of a linear demand curve,p = a b q,p267,Strikes and profits. The Laffer

35、 curve.,Similarly, MR = R / q = p (q) 1 + 1 /(q) where ( q ) = ( pq ) / (qp).,The income elasticity of demand. The arc elasticityandthe point elasticity.,PRICE,QUANTITY,a,a/2,Slope=-2b,Slope=-b,a/2b,a/b,MR,Demand, AR,Marginal revenue p275,Marginal revenue for a linear demand curve.,MR = p(q)1-1/e,D,

36、 AR,QUANTITY,PRICE,Marginal revenue,MR for a constant elasticity demand curve,Chapter 16Equilibrium,The market supply curve. The competitive equilibrium. Pareto efficiency.,Supply,Demand,QUANTITY,PRICE,Pd,Pd=Ps=P*,Ps,Willing to buy at this price,Willing to sell at this price,Q,Pareto efficiency p301

37、,Q*,Market supply and market shortage,P*,P,Q*,Qd,Qs,Market shortage,equilibrium,price,quantity,supply,demand,Shortage is not scarcity.,QUANTITY,PRICE,p*,q*,Demand curve,Supply curve,PRICE,QUANTITY,q*,p*,Supply curve,Demand curve,A,B,Special cases of equilibrium p291,Algebra of the equilibrium. Compa

38、rative statics. Shifting both curves. p294,Taxes. DistinguishPp , the price paid by consumers, Pr , the price received by producers, andPo , the original price.,Supply,Demand,QUANTITY,PRICE,A,C,Pp,Pr,Q*,Amount of tax revenue: A+C,The deadweight loss of a tax p301,The deadweight loss of the tax: B+D,

39、B,D,Chapter 17Technology,Inputs and outputs. Factors of production: land, labor, capital, raw materials, and so on.,Y = f (X ) = production function,Y = Output,X = Input,Production set,A production set p307,Examples of technology (isoquants analysis):,Fixed proportions, Perfect substitutes, Cobb-Dou

40、glas. Figs. p308,Isoquants,x1,x2,Fixed proportion,Isoquants,x1,x2,Perfect subsitutes,Assumptions of technology: monotonic (free disposal),and convex. p310,(a1/2 + b1/2 , a2/2 + b2/2),isoquant,x1,x2,a2,b2,a1,b1,The marginal product, MPi = d y / d x i . Y is output,The technical rate of substitution (

41、TRS):,With d y = 0 along any isoquant, TRS (x1, x2 ) = d x2 / d x1 = MP1 (x1, x2) / MP2 (x1, x2 ).,The long run (LR) and the short run (SR),Returns to scale: Increasing, decreasing, and constant: f ( t x ) t f ( x )=,Chapter 18Profit Maximization,The organization of firms:,Proprietorships, partnersh

42、ips, corporations.,SR profit maximization,= py - w1x1 - w2x2 y = / p + w2x2 / p + w1x1 / p describes isoprofit lines, max x1 gives pMP1 = w1. Fig. p323,Isoprofit lines slope = w1/p,y = f (x1, x2) Production function,x1,x1*,Output,y*,/p+w2x2/p,Profit maximization,Optimum lies on the tangency of an is

43、oprofit line and the production function.,P324 Comparative statics:,Increasing p increases x1 and then y. Increasing w1 reduces x1, and thus the factor demand curve follows. LR: both x1 and x2 are variable. Figs.,A,x1,f(x1),High w1,Low w1,B,x1,f(x1),Comparative statics,Low p,High p,要素价格,产品价格,Chapter

44、 19,Cost Minimization,Basic model:,min x1, x2 w1 x1 + w2 x2 subject to f (x1 , x2 ) = y,gives c ( w1 , w2 , y ),Isocost lines: p337,x2 = C/w2 w1x1/w2.,Tangency of an isocost line and an isoquant., MP1 (x1, x2) / MP2 (x1, x2 ) = TRS(x1, x2 ) = w 1 / w 2,Isocost lines slope= w 1 / w 2,Isoquant f (x1 ,

45、 x2 ) = y,Optimal choice,x2*,x2,x1*,x1,.,Minimizing costs for y = minax1 , bx2;完全互补 y = ax1 + bx2; 完全替代 and y = x1a x2b. Cobb-,Fixed and variable costs. (FC and VC),Total, average, marginal, and average variable costs. (TC, AC, MC and AVC),MC () AC if and only if AC is increasing (decreasing),MC cut

46、s AC (AVC) at ACs (AVCs) extreme.,MC,AVC,AC,y,AC AVC MC,.,.,Chapter 20,Cost Curves,The area under MC gives VC:,MC = VC,MC,Variable costs,MC,y,Division of output among plants of a firm.,MC1,MC2,Typical cost curves.,c (y) = y 2 + 1.,Example:,AC MC AVC,y,MC,AVC,AC,The cost curves for c (y) = y 2 + 1,.,

47、2,1,LR and SR cost curves.,y,AC,SAC=C(y1, k* )/y,LAC=C(y)/y,.,y*,Short-run and long-run average costs,y,AC,Short-run average cost curves,Long-run average cost curves,y*,Short-run and long-run average costs,are costs that are not recoverable. A special kink of fixed costs.,Sunk costs,Chapter 21,Firm

48、Supply,Pure competition.,Price Taker.,The demand curve facing a competitive firm. p368,Q,P,P*,Market price,Demand curve facing firm,Market demand,The supply decision:,FOC: MC ( y* ) = p.,SOC: MC ( y* ) 0.,The firms supply curve is the upward-sloping part of MC that lies above the AVC curve.,The part

49、 of MC is also seen as the inverse supply function.,MC,AVC,AC,y,AC AVC MC,P,y2,y1,firms supply curve,Three equivalent ways to measure the producers surplus ( = R VC = + FC ). p375,P377 Example:,c ( y ) = y 2 + 1.,LR: p = MC ( y, k ( y ) ),vs,SR: p = MC ( y, k ),Chapter 22,Industry Supply,Horizontal

50、summation gives,the industry supply.,Y,P,S1,S2,S1 + S2,Entry and exit.,The “zero profit” theorem.,Free entry vs barriers to entry.,Economists versus lobbyists,Rent seeking.,Chapter 23,Monopoly,The coincidence of the inverse demand curve D and the average revenue curve AR. Fig.,With MR = d R / d y =

51、p (y ) 1 + 1 /(y) , p ( y ) = MC ( y ) / 1 1 / |( y ) | .,Two equivalent ways to determine the equilibrium: MC = MR, or AR = MC / ( 1 | ). Figs. FOC: MC = MR. SOC: MC MR .,The impact of taxes on a monopoly. p411 Inefficiency of monopoly. Fig. p412 Deadweight loss of monopoly. Fig,Inefficiency of mon

52、opoly,Mc,MR,Demand, AR,Price,pm,pc,ym,yc,output,Deadweight lost,Deadweight loss of monopoly,A,B,C,PRICE,Monopoly Price P*,Competitive price,MC,Demand, AR,MR,Y*,output,垄断收益,Natural monopoly. Figs. p417 What causes monopolies: by nature or by permission. The minimum efficient scale factor. Regulation

53、of monopoly: AC = AR.,Chapter 24,Monopoly Behavior,Price discriminations of first-degree (perfect), of second-degree (bulk discounts), and Price discrimination of third-degree (market segmentation): Figs.,MC(y1+y2) = MR1(y1) = MR2 (y2) gives p1 1 1 / |1 ( y1 )| = p2 1 1 / |2 ( y2 )| .,Fig!,Chapter 2

54、6,Oligopoly, mainly Duopoly,Quantity or price competitions.,Sequential games.,Backward solution.,Identical products:,p = p (Y ), Y = y1 + y2 .,Quantity leadership: Stackelberg model.,gives the followers reaction function y2 = f 2 (y1) ; then max y1 p (y1+ f2 (y1 ) y1 c1 ( y1 ) determines y1.,dp / dy

55、2 = MC2,MR2 = p (y1+y2) + y2,Example:,p ( y1 + y2) = a b ( y1 + y2) , c = 0.,The leader is supposed to set p first, then max,Price leadership:,y2 py2 c2 (y2),S2(p).,gives,R(p) = D(p) - S2(p).,Now, the leader goes as a monopolist facing the residual demand,Example:,D(p) = a bp, c2 ( y2 ) = y22 / 2, c

56、1 ( y1 ) = c y1.,Simultaneous games. Bertrand price competition leads to p = MC even only two firms. Thus only quantity setting consideration.,Cournot model of quantity competition: max yi p( yi + yje) yi ci ( yi ), where yje is the output of Firm j expected by Firm i, gives yi = fi (yje), then the

57、consistence determines the equilibrium.,Adjustment to an equilibrium.,where si = yi / Y.,p (Y) 1 si / |(Y)| = MCi(yi),Y = y1 + + yn ,Several firms in Cournot equilibrium:,Chapter 27,Game Theory,Three fundamental elements to describe a game: Players, (pure) strategies or actions, payoffs.,B b r,b A r,1, -1,-1, 1,-1, 1,1, -1,Color Matching,Payoff matrices for Two-person games.