Varian_Chapter16_Equilibrium.ppt

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1、ChapterSixteenEquilibriumMarketEquilibriumAmarketisinequilibriumwhentotalquantitydemandedbybuyersequalstotalquantitysuppliedbysellers.MarketEquilibriumpD(p)q=D(p)MarketdemandMarketEquilibriumpS(p)Marketsupplyq=S(p)MarketEquilibriumpD(p),S(p)q=D(p)MarketdemandMarketsupplyq=S(p)Marke

2、tEquilibriumpD(p),S(p)q=D(p)MarketdemandMarketsupplyq=S(p)p*q*MarketEquilibriumpD(p),S(p)q=D(p)MarketdemandMarketsupplyq=S(p)p*q*D(p*)=S(p*);themarketisinequilibrium.MarketEquilibriumpD(p),S(p)q=D(p)MarketdemandMarketsupplyq=S(p)p*S(p’)D(p’)

3、quantitydemanded.p’D(p’)MarketEquilibriumpD(p),S(p)q=D(p)MarketdemandMarketsupplyq=S(p)p*S(p’)D(p’)S(p”);anexcess

4、ofquantitydemandedoverquantitysupplied.p”S(p”)MarketEquilibriumpD(p),S(p)q=D(p)MarketdemandMarketsupplyq=S(p)p*D(p”)D(p”)>S(p”);anexcessofquantitydemandedoverquantitysupplied.p”S(p”)Marketpricemustrisetowardsp*.MarketEquilibriumAnexampleofcalculatingamarketequilibriumwhenthemarke

5、tdemandandsupplycurvesarelinear.MarketEquilibriumpD(p),S(p)D(p)=a-bpMarketdemandMarketsupplyS(p)=c+dpp*q*MarketEquilibriumpD(p),S(p)D(p)=a-bpMarketdemandMarketsupplyS(p)=c+dpp*q*Whatarethevaluesofp*andq*?MarketEquilibriumAttheequilibriumpricep*,D(p*)=S(p*).MarketEquilibriumAttheeq

6、uilibriumpricep*,D(p*)=S(p*).Thatis,MarketEquilibriumAttheequilibriumpricep*,D(p*)=S(p*).Thatis,whichgivesMarketEquilibriumAttheequilibriumpricep*,D(p*)=S(p*).Thatis,whichgivesandMarketEquilibriumpD(p),S(p)D(p)=a-bpMarketdemandMarketsupplyS(p)=c+dpMarketEquilibriumCanwecalculateth

7、emarketequilibriumusingtheinversemarketdemandandsupplycurves?MarketEquilibriumCanwecalculatethemarketequilibriumusingtheinversemarketdemandandsupplycurves?Yes,itisthesamecalculation.MarketEquilibriumtheequationoftheinversemarketdemandcurve.Andtheequationoftheinversemarketsupplycurv