北大微观经济学

Market Equilibrium
p
Market demand
p* p”
Market supply
q=S(p)
D(p”) > S(p”); an excess of quantity demanded over quantity supplied. q=D(p)
S(p”) D(p”) D(p), S(p)
and
p
S1(q)
c d
q.
At the equilibrium quantity q*, D-1(p*) = S-1(p*).
That is,
a q* c q*
b
d
which gives q* ad bc
bd
and p* D1(q* ) S1(q* ) a c .
bd
Market Equilibrium
D-1(q), Market S-1(q) demand
p* ac bd
Market supply
S-1(q) = (-c+q)/d
D-1(q) = (a-q)/b
q* ad bc
q
bd
Market Equilibrium
Two special cases: quantity supplied is fixed, independent of the market price, and quantity supplied is extremely sensitive to the market price.
Marketwenku.baidu.comsupply
q=S(p)
D(p’) < S(p’); an excess of quantity supplied over quantity demanded. q=D(p)
D(p’)
S(p’) D(p), S(p)
Market Equilibrium
p
Market demand
p’ p*
Market Equilibrium
p
Market quantity supplied is
fixed, independent of price.
the equation of the inverse market demand curve. And
q S(p) c dp p c q S1(q), d
the equation of the inverse market supply curve.
Market Equilibrium
Market price must rise towards p*.
Market Equilibrium – Linear D & S
D(p) a bp
S(p) c dp
At the equilibrium price p*, D(p*) = S(p*). That is, a bp* c dp* which gives p* a c
Also called “market is cleared” Supply may not equal production
Market Equilibrium
p
Market demand
Market supply
q=S(p)
q=D(p) D(p), S(p)
Market Setting
Competitive market • Contestable market
Can we calculate the market equilibrium using the inverse market demand and supply curves?
Yes, it is the same calculation.
Market Equilibrium
q D(p) a bp p a q D1(q), b
Market Equilibrium
p
Market demand
p*
Market supply
q=S(p)
D(p*) = S(p*); the market is in equilibrium.
q=D(p)
q*
D(p), S(p)
Market Equilibrium
p
Market demand
p’ p*
Market supply
q=S(p)
D(p’) < S(p’); an excess of quantity supplied over quantity demanded. q=D(p)
D(p’)
S(p’) D(p), S(p)
Market price must fall towards p*.
D-1(q), Market S-1(q) inverse
demand
Market inverse supply S-1(q) = (-c+q)/d
At equilibrium,
p*
D-1(q*) = S-1(q*).
D-1(q) = (a-q)/b
q*
q
Market Equilibrium
p D1(q) a q b
Market Equilibrium
p
Market demand
p* p”
Market supply
q=S(p)
D(p”) > S(p”); an excess of quantity demanded over quantity supplied. q=D(p)
S(p”) D(p”) D(p), S(p)
Structure
Market equilibrium Quantity tax and equilibrium Tax incidence （税收分担） Deadweight loss （额外净损失）
Market Equilibrium
A market is in equilibrium when total quantity demanded by buyers equals total quantity supplied by sellers.
bd and q* D(p* ) S(p* ) ad bc .
bd
Market Equilibrium
p
Market demand
p* ac bd
Market supply
S(p) = c+dp
D(p) = a-bp
q* ad bc bd
D(p), S(p)
Market Equilibrium