15market demand and elasticity-ho

15market demand and elasticity-ho - Market Demand Demand...

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Unformatted text preview: Market Demand Demand Elasticity Elasticity & Revenue Market Demand cont. Chapter 15 Market Demand Demand Elasticity Elasticity & Revenue Outline Deriving market demand from individual demands How responsive is q d to a change in price? (elasticity) What is the relationship between revenue and demand elasticity? Market Demand Demand Elasticity Elasticity & Revenue Clicker Vote When deriving market demand from individual demand curves, we add them up A) Vertically B) Diagonally C) Horizontally D) It depends Market Demand Demand Elasticity Elasticity & Revenue From Individual Demands to Market Demand Let the (inverse) demand of agent 1 and agent 2 be P ( q 1 ) = 20- q 1 P ( q 2 ) = 5- q 2 2 Cats Price D 1 (p) Demand of Agent 1 20 20 Cats Price D 2 (p) Demand of Agent 2 10 5 Market Demand Demand Elasticity Elasticity & Revenue From Individual Demands to Market Demand To find market (total) demand, we must fix the price and add up the quantities. Easier to do with demand , as opposed to inverse demand . D 1 ( p ) = max { 20- p , } D 2 ( p ) = max { 10- 2 p , } Cats Price D 1 (p) Demand of Agent 1 20 20 Cats Price D 2 (p) Demand of Agent 2 10 5 Market Demand Demand Elasticity Elasticity & Revenue From Individual Demands to Market Demand The market demand is the horizonal sum (for a given p ) of all individual demand: D ( p ) = X i D i ( p ) = D 1 ( p ) + D 2 ( p ) Cats Price D 2 (p) 10 5 D 1 (p) 20 20 kink Market Demand Market Demand...
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15market demand and elasticity-ho - Market Demand Demand...

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