penn101_09s5

penn101_09s5 - Market Demand Equilibrium Econ 101:...

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Unformatted text preview: Market Demand Equilibrium Econ 101: Intermediate Microeconomics Consumer Theory III: The Market Jing Li Department of Economics University of Pennsylvania February 19, 2009 Jing Li Intermediate Microeconomics Market Demand Equilibrium Market Demand Function Elasticity Analysis From individual to market demand There are n individuals on the market, i = 1 , 2 , , n ; Consumer i has preferences u i and income m i ; x 1 i ( p 1 , p 2 , m i ) : consumer i s demand function for good 1; x 2 i ( p 1 , p 2 , m i ) : consumer i s demand function for good 2. Market demand function for good 1: X 1 ( p 1 , p 2 , M ) = n X i = 1 max { x 1 i ( p 1 , p 2 , m i ) , } , where M = n i = 1 m i denotes the aggregate income. Example: x 1 1 = 50 p 1 , x 1 2 = 10- p . Note the non-negativity requirement for demand: x 1 i 0 for all i . Jing Li Intermediate Microeconomics Market Demand Equilibrium Market Demand Function Elasticity Analysis From individual to market demand There are n individuals on the market, i = 1 , 2 , , n ; Consumer i has preferences u i and income m i ; x 1 i ( p 1 , p 2 , m i ) : consumer i s demand function for good 1; x 2 i ( p 1 , p 2 , m i ) : consumer i s demand function for good 2. Market demand function for good 1: X 1 ( p 1 , p 2 , M ) = n X i = 1 max { x 1 i ( p 1 , p 2 , m i ) , } , where M = n i = 1 m i denotes the aggregate income. Example: x 1 1 = 50 p 1 , x 1 2 = 10- p . Note the non-negativity requirement for demand: x 1 i 0 for all i . Jing Li Intermediate Microeconomics Market Demand Equilibrium Market Demand Function Elasticity Analysis From individual to market demand There are n individuals on the market, i = 1 , 2 , , n ; Consumer i has preferences u i and income m i ; x 1 i ( p 1 , p 2 , m i ) : consumer i s demand function for good 1; x 2 i ( p 1 , p 2 , m i ) : consumer i s demand function for good 2. Market demand function for good 1: X 1 ( p 1 , p 2 , M ) = n X i = 1 max { x 1 i ( p 1 , p 2 , m i ) , } , where M = n i = 1 m i denotes the aggregate income. Example: x 1 1 = 50 p 1 , x 1 2 = 10- p . Note the non-negativity requirement for demand: x 1 i 0 for all i . Jing Li Intermediate Microeconomics Market Demand Equilibrium Market Demand Function Elasticity Analysis From individual to market demand There are n individuals on the market, i = 1 , 2 , , n ; Consumer i has preferences u i and income m i ; x 1 i ( p 1 , p 2 , m i ) : consumer i s demand function for good 1; x 2 i ( p 1 , p 2 , m i ) : consumer i s demand function for good 2. Market demand function for good 1: X 1 ( p 1 , p 2 , M ) = n X i = 1 max { x 1 i ( p 1 , p 2 , m i ) , } , where M = n i = 1 m i denotes the aggregate income....
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This note was uploaded on 09/27/2009 for the course ECON 101 taught by Professor Dannicatambay during the Spring '08 term at UPenn.

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penn101_09s5 - Market Demand Equilibrium Econ 101:...

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