Aggregate Demand How do we get aggregate demand from individual demands? Two people with demands xA(p1,p2,m) and xB(p1,p2,m). Aggregate demand X=xA+xB.

Slides:

Advertisements

Similar presentations

Information Technology Phones, Faxes, , etc. all have the following property: –Network externalities: The more people using it the more benefit it.

Advertisements

Information Technology

Review of Results from Double Auctions 20 different markets 10 buyers and 10 sellers in each market – the 5 buyers and 5 sellers on page plus.

Network Externalities What is a network externality? –When a person buys a good or service, he becomes part of a network. –Thus the network increases in.

Game Theory Game theory models strategic behavior by agents who understand that their actions affect the actions of other agents. Useful to study –Company.

C4S1: Demand Main Idea: –Demand is a willingness to buy a product at a particular price.

Ch. 5: EFFICIENCY AND EQUITY

Chapter 6 Market Efficiency and Government Intervention.

Chapter 6 Market Efficiency and Government Intervention.

Information Technology Phones, Faxes, , etc. all have the following property: –Network externalities: The more people using it the more benefit it.

Information Technology Phones, Faxes, , etc. all have the following property: –Network externalities: The more people using it the more benefit it.

Consumers, Producers, and the Efficiency of Markets Outline:  Positive economics: Allocation of scarce resources using forces of demand and supply  Normative.

Gaming system Which video game system do you have? –Why did you buy that brand? Which car do you have? –Why did you buy that brand? Washing Machine? –Why.

4.1 Understanding Demand The law of demand says that people will buy less of a good when its price rises, and more of a good when its price falls.

Notebook # 11 Economics 4-2 Factors Affecting Demand.

Chapter Thirty-Five Information Technology. Information Technologies u The crucial ideas are: –Complementarity –Network externality.

1 1 st degree price discrimination A form of Monopoly Power.

Economic surplus Gains and losses with international trade: Economic Welfare.

Welfare Economics Consumer and Producer Surplus. Consumer Surplus How much are you willing to pay for a pair of jeans? As an individual consumer, you.

Consumer and Producer Surplus Consumer and producer surplus are important concepts to use when discussing economic welfare. This presentation looks at.

Demand, Supply, & Market Equilibrium Chapter 3. Demand A schedule or curve that shows the various amounts of a product that consumers are willing and.

Understanding Supply. Outcome: Describe the behavior of sellers in a competitive market.

Consumer; Producer Surplus and Deadweight loss Neeti Patel.

The Laws of Demand and Supply.

Copyright © 2006 Thomson Learning 5 Elasticity and Its Applications.

Chapter Thirty-Five Information Technology. Information Technologies  The crucial ideas are:  Complementarity  Network externality.

Law of Demand Lecture.

Unit II: The Nature and Function of Product Markets

TOOL #3 THE SUPPLY AND DEMAND MODEL. Our purpose is to illustrate how the supply and demand model can describe a macroeconomic system. One of the impressive.

AAEC 2305 Fundamentals of Ag Economics Chapter 5 Theory of Markets.

Game Theory Game theory models strategic behavior by agents who understand that their actions affect the actions of other agents. Useful to study –Company.

Demand and Supply Chapter 3. Demand demand is a schedule that shows the various amounts of a product consumers are WILLING and ABLE to BUY at each specific.

Or…My Pet Rock Died.. Demand : the desire to have some good or service and the ability to pay for it. It isn’t enough for consumers to desire a good,

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Revisiting the Market Equilibrium Do the equilibrium price and quantity maximize.

Copyright © 2004 South-Western Welfare Economics Welfare economics is the study of how the allocation of resources affects economic well-being. Buyers.

Copyright © 2004 South-Western 5 Elasticity and Its Applications.

Econ Unit 3 Demand.

Unit 4: Supply & Demand DEMAND Chapter 4. Demand: the desire, ability and willingness to buy a product.

Supply and Demand. The Market Forces of Supply and Demand uSupply and demand are the forces that make market economies work. uMicroeconomics is basically.

Demand and Supply Krugman Section Modules 5-7. Demand demand is a schedule that shows the various amounts of a product consumers are WILLING and ABLE.

SUPPLY & DEMAND. Demand  Demand is the combination of desire, willingness and ability to buy a product. It is how much consumers are willing to purchase.

Title of Paper/Report Issue addressed in the paper Why this issue is important (background)

Demand: how much (quantity) of a product or service is desired by buyers Supply: How much of the good or service the market has to/can offer Law of Demand:

The Basics of Economics. Economic Activity Our economy, much like others around the world operate on a circular flow of economic activity. –Goods and.

This saying will be used for 4 different definitions. All you will have to do is fill in the blanks!! THE AMOUNT OF A GOOD OR SERVICE THAT ___1____ ARE.

 I can DEFINE supply and demand and understand how, together, they determine MARKET PRICES.

1 Chaps 4: Competitive markets- how they work characteristics of competitive markets demand supply market equilibrium and how to compute it welfare properties.

Marketing I Curriculum Guide. Pricing Standard 4.

What is demand? More than just want of a good or service. Must have: Desire to buy Ability, capacity to buy Willingness to buy product It is a mix of what.

Supply and Demand A competitive market is a market in which there are   many buyers and sellers   of the same good or service. The supply and demand.

Demand and Supply Chapters 4, 5 and 6. Demand demand is a schedule that shows the various amounts of a product consumers are WILLING and ABLE to BUY at.

Game Theory Game theory models strategic behavior by agents who understand that their actions affect the actions of other agents. Been used to study –Market.

Demand Standards SSEMI2 The student will explain how the Law of Demand, the Law of Supply, prices, and profits work to determine production and distribution.

 A market is an institution or mechanism which brings together buyers and sellers of particular goods and services. ◦ May be local, national, or international.

How do Supply & Demand Get Together to Make Markets? Agenda: I.What is Competition? II.Birds & Bees Review A. Where do demand curves come from? B. Where.

Lecture 6-8 Information Technology.

Warm Up Describe the relationship between consumers and producers.

MARKET EQUILIBRIUM.

Elasticity and Its Application

Chapter Six: Welfare Analysis.

Chapter 7: Consumer & Producer Surplus

Gaming system Which video game system do you have?

Welfare Economics Part II

SUPPLY & DEMAND.

Module 5 Supply and Demand.

Equilibrium in the Market

Market Equilibrium – Consumer and Producer Surplus Graphically, we can identify the areas representing consumer and producer surplus, which.

Chpt 2: Supply and Demand

How Much Will We Produce

Presentation transcript:

Aggregate Demand How do we get aggregate demand from individual demands? Two people with demands xA(p1,p2,m) and xB(p1,p2,m). Aggregate demand X=xA+xB. What does this look like with demand curves? Horizontal or Vertical addition?

Information Technology Phones, Faxes, , etc. all have the following property: –Network externalities: The more people using it the more benefit it is to each user. Computers, VCRs, PS2s, also have this property in that both software can be traded among users and the larger the user market, the larger number of software titles are made. How do markets operate with such externalities?

Competition & Network Externalities Individuals 1,…,1000 (call this number v) Each can buy one unit of a good providing a network externality. Person v values a unit of the good at nv, where n is the number of persons who buy the good.

Competition & Network Externalities What is the demand at price p? If v is the marginal buyer, valuing the good at nv = p, then all buyers v’ > v value the good more, and so buy it. Quantity demanded is n = v. So inverse demand is p = n(1000-n). Graph this! What is the supply curve if marginal cost c<250,000?

Competition & Network Externalities What are the market equilibria? Zero. A large numbers of buyers buy. –large n*  large network externality value n*v –good is bought only by buyers with n*v  c; i.e. only large v  v* = c/n*. The other point is unstable and called a threshold point. Below this, demand will go to zero. Above this, the product would be a hit.

Discussion points Competitors: Sony vs. Beta, Qwerty vs. Dvorak, Windows vs. Mac, Playstation vs. Xbox. Does the best always win?

Demand Review What is aggregate demand if –XA=10-p. –XB=20-p. What about if they only consume positive amounts of a good? –XA=Max{10-p,0}. –XB=Max{20-p,0}.