Microeconomics I
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| Cartes-fiches | 336 |
|---|---|
| Langue | English |
| Catégorie | Economie politique |
| Niveau | Université |
| Crée / Actualisé | 28.05.2019 / 02.03.2025 |
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Questions about how appartments rents are determined
- Who will rent close appartments?
- At what price?
- Will the allocation of appartments be desirables at any sense?
Two basic postulates
Rational choice and equilibrium
Rational choice
Each person tries to choose de best alternative available to him or her
Equilibrium
Market price adjust untill quantity demanded equals quantity supplied
Market demande curve
The quantity demanded vs price graph
Supply for appartments
Quantity fixed
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 equilibrium
Quantity demanded = quantity available ) price will neither rise nor fall
Competitive market allocation
by willingness to pay
Endogenous in the model of appartments
I price of close apartments
I exchanged quantity of close apartments
Exogenous in the model of appartments
I price of distant apartments
I quantity of close apartments
I incomes of potential renters
Suppose de price of distant appartments rises
Demand for close apartments increases (rightward shift), causing
a higher price for close apartments
Comparative statics: price of distant appartment rises graph
Comparative statics: more close appartments
Supply is greater, so the price for close apartments falls
More close appartments graph
Imperfectly competitive market
a monopolistic landlord
a perfectly discriminatory monopolistic landlord
a competitive market subject to rent control
Monopolistic market equilibrium
If renters buy some houses
Supply (<-) because less appartments to rent
Demand (<-) because they don't ask for appartment anymore
Price doesn't change
Q diminishes
If government ask for a tax (appartments)
landlords suport burden of tax
zéro passthrough: rare because supply is fixed
Rent control
Pareto efficiency
the only way one person’s welfare can be improved is to lower another person’s welfare
Pareto efficiency in competitive equilibrium
Pareto efficient
Pareto efficiency in discriminatory monopoly
Pareto efficient
Pareto efficiency in monopoly
Inefficient because not all appartment are occupied
Pareto efficiency in rent control
Inefficient
Reservation price
maximum willingness to pay
indifferent between purchasing or not purchasing the good
Two parameter of the optimizazion principle
Budget constraint
Preferences
A consumer choice set
is the collection of all consumption choices available to the consumer
Condition for an affordable bundle
Equation of the budget line
Slope of the budget line
What affect the budget line?
Change in income
Change in prices
Budget constraint: change in income
Suppose income increases from m to m' (i.e. m > 0), c.p.
Budget constraint: changes in prices
Suppose price of good 1 increases from p to p' (i.e. delta p > 0),
c.p.
Consumer worse off, unleast he didn't consume good 1, then indifferent
Both prices double
Perfect balanced inflation
No change in welfare
P rises and M rises
Simon faces the budget line p1x1 + p2x2 = m. Suppose that the price of good 1 becomes 4 times larger, the price of good 2 becomes 16 times larger and income becomes 8 times larger.
How is Simon affected?
How Simon is affected? Graph
3 kinds of taxes
