范里安 英文原版完全版Ch01.pptVIP

Chapter One The Market Economic Modeling What causes what in economic systems? At what level of detail shall we model an economic phenomenon? Which variables are determined outside the model (exogenous) and which are to be determined by the model (endogenous)? Modeling the Apartment Market How are apartment rents determined? Suppose apartments are close or distant, but otherwise identical distant apartments rents are exogenous and known many potential renters and landlords Modeling the Apartment Market Who will rent close apartments? At what price? Will the allocation of apartments be desirable in any sense? How can we construct an insightful model to answer these questions? Economic Modeling Assumptions Two basic postulates: Rational Choice: Each person tries to choose the best alternative available to him or her. Equilibrium: Market price adjusts until quantity demanded equals quantity supplied. Modeling Apartment Demand Demand: Suppose the most any one person is willing to pay to rent a close apartment is $500/month. Then p = $500 ? QD = 1. Suppose the price has to drop to $490 before a 2nd person would rent. Then p = $490 ? QD = 2. Modeling Apartment Demand The lower is the rental rate p, the larger is the quantity of close apartments demanded p ? ? QD ?. The quantity demanded vs. price graph is the market demand curve for close apartments. Market Demand Curve for Apartments Modeling Apartment Supply Supply: It takes time to build more close apartments so in this short-run the quantity available is fixed (at say 100). Market Supply Curve for Apartments Competitive Market Equilibrium “low” rental price ? quantity demanded of close apartments exceeds quantity available ? price will rise. “high” rental price ? quantity demanded less than quantity available ? price will fall. Competitive Market Equilibrium Quantity demanded = quantity available ? price will neither rise nor fall so the market is at a competitive equilibrium. Competitive Market Equilibrium