Transcript Document 7196258

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Intermediate Microeconomics with Calculus by Hal
Varian First Edition
Homework
Midterm (50%) (11/9)
Final (50%) (1/11)
[email protected], Mon 1:30-2:00 or by
appointment (社科757)
Course TA 陳紅霓, [email protected]
Letter grades are relative as you will learn in this
class only relative prices matter.
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Initiative
1 bonus point per class meeting (up to 15 bonus
points)
2 bonus points for a 5-minute preview presentation
for each chapter (Chaps 2-18,17 groups of two)
You could only have 2 slides at most
Discuss…
Letter grades are relative as you will learn in this
class only relative prices matter. I do not stick to the
conversion table.
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蘋果橘子經濟學
超爆蘋果橘子經濟學
生命中的經濟遊戲
終結貧窮：可以在2025年以前達成
胖子的脂肪該被抽稅嗎？
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Serious research? Join my journal club or my
neuroecon class next semester
Cell phone
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• Chapter 1 The Market
• Key Concept: Pareto Efficiency
(如果能皆大歡喜那為什麼不做呢?)
• Market is Pareto efficient.
• Discriminating Monopolist is Pareto
efficient too.
• Pareto efficiency is silent on
distributional issues.
• Chapter 1 The Market
• A model of the apartment market in a
college town
• Every student needs one apartment.
• All apts identical except: inner ring and
outer ring
• Focus on the market in the inner ring.
• Assume the rent in the outer ring is fixed
and in enough supply (the second best
alternative).
• Consider the demand curve (at every
price, how many students would be
willing to rent the apartments?).
• When would a student be willing to rent
one unit?
• A price at which a student is indifferent
between paying and living in the inner
ring and renting an apt in the outer ring
• Reservation price (a person’s maximum
willingness to pay for something)
• We can now draw the demand curve.
• If a lot of persons, reasonable to assume
smoothness
• We see downward sloping and if goods
are continuous, marginally indifferent
between buying this extra amount and not
(draw)
• The idea of surplus
• Turn to the supply curve
• Landlords want to make as much profit as
possible, so they jump in when renting
and not renting yield equal profit.
• Can similarly have a step-function-like
supply curve
• Assume in a short run, reasonable to have
a vertical supply curve
• In continuous amounts, P=MC,
marginally selling and not selling give the
same profit
• Similarly we have the idea of producer’s
surplus.
• Putting demand and supply curve
together: get an equilibrium price p*
• According to the market mechanism, who
is willing to pay above p* gets to live in
the inner ring.
• Those who are not willing to pay as high
as p* live in the outer ring.
• Those who trade in the market all get
some surplus (你情我願).
• Equilibrium: at p* the number of people
who are willing to rent (A) equals the
number of apartments available for
renting (B)
• p>p*: A<B (surplus, incentives to lower
the price)
p<p*: A>B (shortage, incentives to raise
the price)
• Comparative statics
• (1) The university builds some new
apartment. All these inner ring
apartments are the same.
• (2) Government passes a law that every
landlord has to pay t<p* for every
apartment he owns.
(elasticity and tax incidence)
• Consider other ways to allocate
apartments.
• Discriminating monopolist (DM): a
single seller who can perfectly
discriminates by charging every
consumer’s reservation price.
Who gets the apartment? Still those
whose reservation price is higher than p*.
• Ordinary Monopolist (OM): a single
seller who can only charge a price, so he
maximizes pD(p). Suppose he therefore
charges p’>p*.
Those whose reservation price is higher
than p’ get apts.
• Rent Control (RC): pmax<p* to be
effective
We don’t know who gets the apt except
their reservation price will be at least pmax.
• We now compare which is better.
• Suppliers: DM > OM > Market > RC
• Consumers: DM: indifferent to living in
the outer ring
OM: some surplus
Market: more people with
higher surplus
RC: some with highest
surplus, but some become indifferent to
living in the outer ring
• Pareto efficiency, due to Vilfredo Pareto
(1848-1923): if there exists a way to
make some better off without making
anyone worse off, then it is a Pareto
improvement. (皆大歡喜)
• An allocation that allows for a Pareto
improvement is Pareto inefficient while
an allocation that does not allow for a
Pareto improvement is Pareto efficient.
• Suppose utility takes the form v I - p I if
living in the inner ring; v O - p O if living in
the outer ring.
• Suppose we randomly assign people to
live in the inner ring or outer ring and a
person who is willing to pay 400 is
assigned to the outer ring and another
who is willing to pay 300 is assigned to
the inner ring.
• 400: v400, I – 400 = v400, O – pO
300: v300, I – 300 = v300, O – pO
• Swap, the change of utility is:
400: (v400, I – pO) – (v400, O – pO) = 400 – pO
300: (v300, O – pI) – (v300, I – pI) = - (300 –
pO)
a transfer, say 350 – pO from the 400
person to the 300 person
(黃牛票)
• Market: Pareto Efficient (1st welfare
theorem)
• DM: Pareto Efficient (so efficiency says
nothing about distribution)
• OM: empty apts in the inner ring, not
Pareto efficient.
v200, I – 200 = v200, O – pO, move in, willing
to pay up to (v200, I – pO)-(v200, O – pO)= v200,
I –v200, O =200 – pO > 0, a transfer of (200 –
pO)/2 to a landlord with an empty room in
the inner ring would do.
• RC: not Pareto Efficient
• Remark
• Model: not a one-to-one correspondence
to reality
• Endogenous variable and exogenous
variable (demand curve, we control pO)
(相關物品價格)
• Optimization (U-max, profit max)
• Equilibrium (behaviors consistent)