100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
Previously searched by you
SOLUTIONS MANUAL for Intermediate Microeconomics with Calculus: A Modern Approach: Media Update 1st Edition by Hal R. Varian ISBN 9780393690033. (Complete Download) $32.22
SOLUTIONS MANUAL for Intermediate Microeconomics with Calculus: A Modern Approach: Media Update 1st Edition by Hal R. Varian ISBN 9780393690033. (Complete Download)
Intermediate Microeconomics with Calculus: A Modern Approach: Media Update 1st Edition by Hal R. Varian ISBN 0033, . (Complete Download) SOLUTIONS MANUAL.
Chapter 1 1
Chapter 1
The Market
This chapter was written so I would have something to talk about on the first
day of class. I wanted to give students an idea of what economics was all about,
and what my lectures would be like, and yet not have anything that was really
critical for the course. (At Michigan, students are still shopping around on the
first day, and a good number of them won’t necessarily be at the lecture.)
I chose to discuss a housing market since it gives a way to describe a number
of economic ideas in very simple language and gives a good guide to what liesahead. In this chapter I was deliberately looking for surprising results —analytic
insights that wouldn’t arise from “just thinking” about a problem. The twomost surprising results that I presented are the condominium example and thetaxexampleinSection1.6. Itisworthemphasizinginclassjustwhytheseresults
are true, and how they illustrate the power of economic modeling.
It also makes sense to describe their limitations. Suppose that every con-
dominium conversion involved knocking out the walls and creating two apart-
ments. Then what would happen to the price of apartments? Suppose that the
condominiums attracted suburbanites who wouldn’t otherwise consider rentingan apartment. In each of these cases, the price of remaining apartments would
rise when condominium conversion took place.
The point of a simple economic model of the sort considered here is to focus
our thoughts on what the relevant effects are, not to come to a once-and-for-allconclusion about the urban housing market. The real insight that is offered by
these examples is that you have to consider both the supply andthe demand
side of the apartment market when you analyze the impact of this particular
policy.
The only concept that the students seem to have trouble with in this chapter
is the idea of Pareto efficiency. I usually talk about the idea a little more than
is in the book and rephrase it a few times. But then I tell them not to worryabout it too much, since we’ll look at it in great detail later in the course.
Theworkbook problems herearepretty straightforward. The biggest problem
is getting the students to draw the true (discontinuous) demand curve, as inFigure 1.1, rather than just to sketch in a downward-sloping curve as in Figure
1.2. This is a good time to emphasize to the students that when they are given
numbersdescribingacurve, theyhavetousethenumbers—theycan’tjustsketchin any old shape. 2Chapter Highlights
The Market
A. Example of an economic model — the market for apartments
1. models are simplifications of reality
2. for example, assume all apartments are identical
3. some are close to the university, others are far away
4. price of outer-ring apartments is exogenous — determined outside the
model
5. price of inner-ring apartments is endogenous — determined within the
model
B. Two principles of economics
1.optimization principle —peoplechooseactionsthatareintheirinterest
2.equilibrium principle — people’s actions must eventually be consistent
with each other
C. Constructing the demand curve
1. line up the people by willingness-to-pay. See Figure 1.1.2. for large numbers of people, this is essentially a smooth curve as in Figure
1.2.
D. Supply curve
1. depends on time frame
2. but we’ll look at the short run — when supply of apartments is fixed.
E. Equilibrium
1. when demand equals supply2. price that clears the market
F. Comparative statics
1. how does equilibrium adjust when economic conditions change?
2. “comparative” — compare two equilibria3. “statics” — only look at equilibria, not at adjustment
4. example — increase in supply lowers price; see Figure 1.5.
5. example — create condos which are purchased by renters; no effect on
price; see Figure 1.6.
G. Other ways to allocate apartments
1. discriminating monopolist
2. ordinary monopolist
3. rent control
H. Comparing different institutions
1. need a criterion to compare how efficient these different allocation methods
are.
2. an allocation is Pareto efficient if there is no way to make some group
of people better off without making someone else worse off.
3. if something is notPareto efficient, then there issome way to make some
people better off without making someone else worse off.
4. if something is not Pareto efficient, then there is some kind of “waste” in
the system.
I. Checking efficiency of different methods
1. free market — efficient
2. discriminating monopolist — efficient
3. ordinary monopolist — not efficient4. rent control — not efficient Chapter 1 3
J. Equilibrium in long run
1. supply will change
2. can examine efficiency in this context as well
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller AcademiContent. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $32.22. You're not tied to anything after your purchase.
