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(Central Problems of an Economy)

(interdependent)

(free)

(What to produce)

(alternative uses)(allocation)

(resource allocation)
(preference intensity)
(systematic allocation of resources)(according to priority)
(production possibilities)
(Production Possibilities Curve)

(How to Produce)

(Extensive cultivation)
(Intensive cultivation)

(Highly Labour Intensive)(Capital Intensive)

(substitute)
(For whom to produce)


(Production Possibilities Curve)

COTTON (IN BALES)



100 A
80
60

B
C
D

40
20

F
20 40 60 80 100
WHEAT (IN MILLION TONS)

(Y-axis)
(X-axis)

'B' 'C' 'D' 'E' 'F'


'A' 'F'

'C' 'F'
(Transformed)
'A' 'F'
'A'
'F'

(Concave)


(Concave Curve)
COTTON (IN BALES)

Y
100
80
60
40

G
H
I
J

20

F
0
20 40 60 80 100
X
WHEAT (IN MILLION TONS)



COTTON (IN BALES)

Y
A
100
80
60
40

G
H

20

F
20 40 60 80 100
X
WHEAT (IN MILLION TONS)

(Law of Diminishing Returns)

X Y

(marginal product)

MARGINAL OUT PUT


(IN MAUNOS)



Y
10
8
6
4
2
0
1 2 3 4 5 6 X
ABOUR (NO. OF WORKERS)

(Universal)

(Exceptions)


(Price Mechanism-Demand and Supply Analysis)

(Barter System
of Exchange)
(Price Mechanism)

(Equilibrium
Price)



(Demand Analysis)

(Per
unit of time)

(Individual or Household Demand) :

(i)

(ii)

(iii) (substitutes) (complements)

(iv)

(Market Demand)

(v)

(composition)

(vi)


(Law of Demand)

(inverse relationship)

(off set)

(assumptions)

(Demand Schedule and Demand Curve) :

(i) (ii)

(Demand Schedule and Demand Curve)

(i)

10

3.00
2.5
2.0
1.50

1
2
3
4

A
B
C
D

Price of Oranges
(per dozen) (Rs.)

3.00
2.50

De
ma
n
B d cur

2.00

ve

1.50
1.00
0.50
0

1
2
3
4
Quantity of oranges Demanded
(Dozens)

X-Y-A, B, C D

(Market Demand Schedule and Demand Curve)

A B

A B
11

A +B

3.00
2.50
2.00
1.50

1
2
3
4

2
3
4
5

3
5
7
9

Prince per dozen (in Rs)


(a)
Individual
demand curve
of A
Y

(b)
Individual
demand curve
of B

(c)
Market Demand
curve
Y

D2

3.50 D1

Market demand
curve

2.50
1.50
0.50
0

A
D1

A
X
1 2 34 5 6
Quantity demanded
(Dozens)

A+ B

D2
B1
1 2 3 4 5 67 X
Quantity demanded
(Dozens)

D1

C
1 2 3 4 5 6 7 8 9 10
Quantity demanded
(Dozens) By A + B

A (a) B (b)
(c)
A (A) B
(B) (A+B)
(Horizontal Summation)

(Average or Representative)

12

(i) (Law of Diminishing Marginal Utility)

(Successive)

(ii)

(iii) (Income effect) :

(Income effect)
13

(iv) (Substitution effect) :

(Exceptions) :

(scare)

(Goods Carrying Social Prestige)

(Giffen goods) :

(Robert Giffen)
(Bread)

(Total food intake)

(direct)

14


(i)

Y

Giffen Good
D

Price of Bread (paise)

40
30
20
10

D
0

X
10

20
30
40
Bread (Loaves)
Quantity Demanded

50

DD
(Inferior
good)

(Difference Between Extention and


Contraction of Demand and Increase and Decrease in Demand) :
(i)

15

Price (Rs. Per dozen)

3.00

2.00
1.50

Contraction
of Demand

2.50

Extension
of Demand
Q

1.00
0.50
R

S
2
3
X-Commodity (Units)

T
4

DD X

OPOQ OS OT
(ST) OP OM
OS OR

(Movement along the same demand curve)

(ii)

(Shifts in demand curve)

Price of X (Rs.)

D2

D1

De
cre
as
ei

In
c
de reas
m e
an in
d

nd

em
an
d
D2

D1

O
R
M
N
X
Quantity demanded x commodity (units)

16

DD OP OM
DD
D1D1 OP OM ON
DD
D2D2 OP OR



(Supply Analysis)

(Meaning of Supply) :

(Direct relationship)

(Factors Determining the Supply) :

(i)

(ii)

(iii)

17

(iv)

(v) (Goals of Producers)

(Law of Supply): (Direct)

(Supply Schedule of a Firm):

(Supply curve of a firm):

18

X Y A, B,
C D A, B, C D
SS


R
S

Price per ball-pen (Rs.)

Supply curve
2.50

2.00
1.50

B
A

1.00
0.50

0
4 8 12 16 20
X
Quantity supplied Ball pens (units)

(Market Supply Schedule and Market Supply Curve):

A B

1.00
1.50
2.00
2.50

A
B
10
14
17
19

11
15
18
20

(A +B)
21
29
35
39

A B

19

(Market Supply Curve):


A B

Price (Rs.)

(A)
Supply Curve
of A
Y
S1

(B)
Supply Curve
of B
S2

(C)
Market Supply
Curve
Y

2.50

2.50

2.50

2.00

2.00

2.00

1.50

1.50

1.50

1.00

1.00
S1

0.50
0

0.50
5 10 15 20 25 X
Quantity supplied

Sm

1.00
S2

0.50

5 15
25 X
Quantity supplied

Sm

5 10 20 30 40 X
Total Quantity supplied

(A)A (B)
(X (C)
A OM A ON
OM+ON=OT (14+15=29) X-(Horizontal axis)



(i) (Change in quantity supplied)

20


Y
S
Price (Rs. per dozen)

2.50
P1

2.00
P

1.50

Extension
of supply
Contraction
of supply

P2
1.00
0.50

S
M2

M1

10
15
20
X Commodity (Units)

MP M1P1 OM
OM1
MP M2P2 OM OM2

(ii)

Price (in Rs.)

S2
Decrease in
Supply

S1
Increase in
Supply

S2
O

S1

M2 M M1
Quantity Supplied (units)

X SS OP OM OP OM

SS S1S1
21

S1S1 (OP) OM OM1



SS S2S2 S2S2
(OP) OM OM2



(Determination of Equilibrium Price)

(Equilibrium Price)

(Equilibrium Quantity)

DD
SS
DD SS A A OP
OM
OP
OP
OM
22


(Excess Supply) (Unsold)

(Excess Demand) = 8

Price (per Ball pen Rs.)

Excess
Supply

3.50
3.00
2.50

Equilibrium
point

2.00
1.50
1.00

Excess
demand
D
Equilibrium
quantity

0.50
0

M
5 10 15 20 25 30 35 40
Quantity of Ball pens
DEMANDED/SUPPLIED

Price (in Rs.)

D1

D2
P1
P
P2

R1

R2

D1

D2
O

M2 M M1
Quantity Demanded and Supplied (units)

23

(i)

DD SS R
OP OM
DD D1D1 SS
D1D1 SS R1
OP1(R1M1) OM1
DD D2D2 SS D2D2
SS R2 OP2 R2M2)
OM2

(i)

(ii)

(ii)

Price (Rs.)

S2 S

S1

R2
P2
P
P1

R
R1
S2

S1

D
M2 M M1

Quantity Demanded and Supplied (units)

DD SS R OP
OM
S1S1 OP1

SS S2S2
OP2R2M2)
OM2 OM
24

(Theory of Consumer's Demand):

(Quantitative)

(Utility Analysis) :

(Law of Diminishing Marginal Utility) :

(Marginal Utility)

25

(Total Utility)

(4+3=7)
(4+3+2=9)

(Negative)

(Positive)
(Negative)

X Y-

X-

L
L

(i)

(ii)

(iii)

26

Total and Marginal Utility

12
L
10
8
6
4

Marginal
curve

utility

2
N
0
-1
-2

TU

Total utility
curve

1
2
3
4
Units of Oranges

Points of
satiety
6

X
Negative
utility

(Assumptions)

(Homogenous)

(Exceptions to the Law):

(i)

(ii)

(iii)

27


(Hobbies)

DD
Y-
Y-

28


Marginal utility/Price (in Rs.)

Y
D
1.00
Marginal utility/
Demanded curve

0.80
0.60
0.40

0.20
0

2 3
4
5
Units of Oranges

(i)


n TUnTUn-1
(ii)

(iii)

(Law of Equi-Marginal Utility and Consumer's


Equilibrium): (rational)

X, Y Z

29

X
Y
Z

(MUx)

(MUy)

(MUz)

X YZ

X
X X
Y
Y X
X Y Z

X 18 + 16 + 14 +11 + 9 + 6 =
74
Y 12 + 10 + 8 + 7 + 6
=
43
Z 11 + 9 + 8 + 6
=
34

=
151

X 7, Y Z
76+43+28=147

X, Y Z
30


MUx = MUy = MUz.

X, Y, Z (Px, Py Pz)
(MUx, MUy MUz)

MUx 6
= ,
Px
1

MUy 6
= ,
Py
1

MUz
6
=
Pz
1

MUy
MUx
MUz
=
=
Py
Px
Pz

MUX Px,
=

MUy
Py

(i)
(ii)
MUx
Px
=
=
MUy
Py

(iii)
MUx
Px
=
=
MUy
Py

31

(subjective)


(Quantity)

(Price effect)


(Indifference Curve Analysis)

(J.R. Hicks)
(Cardinal utility system)

(subjective)

(Ordinal utility)

(Combinations)

32


X Y

(X Y (X
Y

X
Y
(A)

(B)

(C)

(D)

(E)

X-X Y-Y X Y
A, B, C, DE A, B, C, D E

(indifferent)


Y
A

Commodity Y(units)

25

20

INDIFFERENCE
CURVE

C
15

10
5
0

2
3
4
5
Commodity X(units)

(Assumptions of Indifferent Curve Analysis) :

33

(Rationality) :

(Transitivity) : B A
A B B A
C B C A

(Diminishing Marginal rate of substitution) :

X Y (MRSxy), Y X-



X
Y
X Y

(MRSxy)
1
2
3

25
20
16

1x = 5y
1x = 4y

13

1x = 3

11

1x = 2y

Y X
X Y
X Y (MRSxy) 1x = 5y X
Y X Y 1x=4y
X Y (MRSxy) X Y
X (MRSxy =y/x)
X
Y X
Y X Y

X X
(Marginal significance) X Y

34

(Properties of Indifference Curve) :

(Indifference curve
slopes dapes downward from left to right) :

X
Y X
Y
IC X
Y


30

Y
A

Commodity Y(units)

25

Decrease in Quantity of Y

20

15

10

Increase in Quantity of X

E
IC

5
0

2
3
4 5
Commodity X(units)

(i) (i)

(i) X Y A (1x+5y) B (2x+10y)


A B A
B

35

(i)
Commodity Y(units)

(ii)
20

10

10

15

10

IC

X 0

X0

IC

20

15

15

IC

20

(iii)

1
2
3
4
Commodity X(units)

1
2
3
4
Commodity X(units)

1
2
3
4
Commodity X(units)

(ii) (X (vertical) (Y
(ii) (iii)(Parallel)
(ii)
A(1x+10y)B(2x+10y) YX
AB

(iii)A(2x+5y) B(2x+10y) X
Y A
B A B

(Indifference curves are generally convex


to the point of origin)
O IC

Y

Commodity Y(units)

25

A
y
B

20

y
15

C
y x

10

CONVEX
D
y x

E
IC

5
0

X
1

2
3
4
Commodity X (units)

36

X Y
X Y

(Concave) (i)
X
X
Y AA1=A1A2=A2A3 BB1 B1B2, B1B2 B2B3
X Y
X
Y

(i)

X Y 45 (ii)
X Y
(ii) 'L'
(iii) X Y
(90 (Kink)

(i)
(ii)
(iii)

x
y
x
y

B3

IC

X
A

A1

A2

A3

Commodity X (units)

5
Commodity Y (units)

B
B1
B2

CONCAVE
Commodity Y(units)

Commodity Y(units)

4
3
2
1
0

IC
1
2
3 4 5
Commodity X (units)

5
4
3
2

IC2

IC1

2 3 4 5
Commodity X (units)

(Two Indifference curves never


interesect or touch each other)

37

Y Commodity (units)

25
A

20
15
13
10
9
5
0

B
C

IC1
IC2

2 3
4
5
X Commodity (units)

IC1 A B, X Y
IC2 A C X Y
A=B A=C B=C B X
Y C X Y
X B C B Y C
Y B=C

(Consumer's Equilibrium)

(i)
(ii)

(iii) X Y

(Budget line)
(i) (Scale of Preferences) (Indifference map) :

(Scale of Preferences)
38

(Indifference Map)

X Y 1x+25y, 2x+20y, 3x+16y, 4x+13y 5x+11y

X Y
X Y

A
B
B
A A
1x+18y B1x+25y X
A B Y A B
A
B B II(B) A
I(A)
C C
B B
39

C III(C) B
II(B)

INDIFFERENCE MAP

Y
35

COMMODITY-Y (UNITS)

30
25
20
15

III(C)

10

II(B)

5
I(A)
0

X
1

COMMODITY-X (UNITS)


O)
X Y-

(Preferences)

(ii) (Budget or Price Line) :

X Y
40

Y-Commodity ((Units)

Y-Commodity ((Units)

Y
X Y
5 A
X X
C
4
B
D
Price Line
3
Y Y
E
K
2
B A B
F
1
AB X Y
B
C
0 2 4 6 8 10 x
2X+4Y,D 4X+3Y, E 6X+2Y F 8X+1Y
X Commodity (Units)

Y
K
6 A1
(2X+2Y)
Original Price
M
5 A
Line (Income Rs. 10)
(7X+3Y)
4 A2
New Price Line
(Income Rs. 12)
3

New Price
Line
1

B1 B1 B1
(Income Rs 8)
(X
2
4
6
8 10 12 X
/Y
X Commodity (Units)

AB
A1B1 AB (Shift)
A2B2
(slope)

OA2
OA OA1
=
=
OB2
OB OB1

Y X
X X
(OB1)Y Y
OA AB
AB1 4.21 X
X OB2
41

AB2 Y X
Y
X
OA 5

AB OB 10 =0.5 X AB1

OA 5

OA

OB 20 =0.25

OB
1

Y Commodity (Units)


Y
5 A
4

Original Price Line


(Price of X = Rs. 1)

3
2 New
Price Line
1 (Price of X
B2
-Rs 1.25)
0
2 4 6 8

New Price Line


(Price of X = 50 P)
B

B1
10 12 14 16 18 20 X

X Commodity (Units)

X Y X Y

IC1, IC2, IC3, IC4 IC5, X Y


X Y

IC1, IC2, IC3, IC4 IC5 AB


E, F P
E IC1 F
IC2 P
IC3 F P
P P

(Point of tangency)

42

X OM Y ON
P

(Common)

Y- Commodity (Units)

Y
A E
5
4
3 N
2
1
0

Equilibrium
Position

IC3
IC1 IC2
B
M
2 4
6
8 10
X Commodity (Units)

IC5
IC4
X

(P)

(i)
Y
Y- Commodity (Units)

F
IC1
0

IC2
B

X Commodity (Units)

(i) AB IC1

F
F
43

AB
IC1
(i) P IC2
F P P IC2
IC2

(i)

(ii)

(i)

Y- Commodity (Units)

A1
A
ICC
N1
N

IC2
IC1
M
0

M1

X Commodity (Units)

B1
X

X X Y Y
X X OB
Y Y OA AB
IC1 P P
X OM Y ON

(Parallel)
A1B1
44

A1B1 IC2 P1
P1 X OM1 Y ON1
X Y
P P1 P P1
(Income consumption curve)
(Positive) (Negative)

(Inferior good)

X X Y
Y AB AB IC1 P
P X OM
(AB)A1B1 A1B1
IC1 P1 P1 P1 X
OM1 P X OM
X MM1
P2
X OM2 X
M1M2 X
X P,P1 P2

(Real Income)

45

Commodity Y (Units)

A2

ICC

A1

P2

A
P1
P
IC

M2

IC1
M1
M1
B B1 B12
Commodity X (Units)
(Interior Commodity)

(ii) (Price Effect) :

X Y
(Y) (X)
(Price Effect)

X Y
AB AB IC P P
X OM X X
OB1 Y
Y OA AB1
AB1 IC1 P1 P P1
X OM1 X OM
OM1 X MM1
P P1 PCC (Price Consumption
Curve) Y
X
46

Commodity Y

A
PCC
P1
N1

IC1

N
IC
0

B M1

Commodity X

B1

Price Effect


Y X

(i)
X
X
X

(ii) (Substitutes)

47

P
OM ON X AB AB1
Y (OA), X (OB) OB1
P1 ON1 OM1

X OM OM1 X
MM1

AB
A1B2 IC1 P2 A1B2
AB
X (OM OM2)AB1 P1
A1B2 P2 IC2
P2 X OM2
AB1 P1
IC1
P P2 P2 P1

X X X
Y X MM2 M2M1


Y
A1

Y-Comodity (Units)

IC1
A

IC

ICC
PCC

N2
N1

P2
P1

IC1

Substitution
Effect

Income Effect
Price Effect
0

M M2 BM1
X-Commodity (Units)

48

IC

B2

B1

(Price effect)

(Normal Good)

(inferior)

(Giffen Good)
(Robert Giffen)

(a large proportion of income)

X X-
AB IC1 P P
X-OM X
AC IC2 P2 P2 X
OM2 X OM
OM2 MM2

ED
AB ED IC2 P1 X OM1
X MM1
P2 X OM2 M1M2
MM1 M1M2
MM2 X
MM2
49

(Giffen Good)

E
P1

Commodity Y

P2
IC2
S.E
(M1M2)

M1

M2

IC1

C
X

B
D
Income Effect (MM2)
Income Effect (MM1)

Commodity X
Giffen Good

(Direct)

(Giffen's paradox)

(i)

(ii)

(iii)

(Derivation of Demand Curve) :


(Drivation)
(Price Consumption Curve)

(i)
(ii)
(iii)
(iv)
50

Price of Whet per Kg


(Rs)

Money Income
(Rs.)

Y

A


P
(Traditional demand curve)
PCC
X Y
P1

IC2
X
IC1
Y
C
M1
B
M
Q
X
4 8 12 16 20 24 28 32 36 40

Quantity of Wheat Demanded (kgs.))

D

1.00
Demand

curve
0.75

D1

0.50

0.25

M
M1
0
4 8
12 16 20 24 28 32 36 40
X

Quantity of Wheat Demanded (kgs.)

X X Y
OA X
X OB
AB IC1 P
X OM X
X OC
AC IC2 P1
P1 X OM1 (24 X P P1
(PCC) (PCC)
X (OA/OB) (OA/OC) (OM)
(OM1)
X-X-Y-X-
D D1 X-
OM OM1 D D1 DD1
X-
51

(complements) (substitutes)


(Limitations)
(i)

(ii)

(Three Dimensional Diagram)


(Algebra)

(complementary goods)

52

I

I

II

(Absolute changes)

53

(Relative change)

III

I

(I)

(II)

54

9
8
6
5

13
15
20
23

117
120
120
115

=>1
=1
=<1

II

ekxahxbZek=kkea
si fzr' kr i fjoru
Z
dher ea
si zfr' kr i fjoru
Z

55

eka
xhdh ek=kk ea
si fjorZ
u
100
i zkjfaHkd ekxa dh ek=kk

dher esai fjoru


Z 100
i kzjfaHkd dher

(1/20 100 = 5)
(100/1000100 =10)10% 5% =2
e P Q
Q P
(Q/Q)100
Q/Q
e = (P/P)100 =
P/P
Q

= Q P/P
Q P
= P Q


Y
T

Price

A B
S
Quantity Demanded

AR BD OA OB
(Q) AB CD) (P) CR
(Q) QA (P) AR
Q

e = P Q
e=

AB AR

CR OA

56

CD AR

(AB = CD)
CR OA

AS AR

AR OA

RS
(AR OT AR, OS TS
TR

RCD RAS

CD AS
AS
=
)=
CR AR
OA

RS/TR RS T S
TR


III

Q P

P Q

(+20) Q/P

IV

57

58

oLr qdh eka


xh xbZek=kk esai fzr' kr i fjorZ
u
mi HkksDrkv ka
sdh v k; ea
si fzr' kr i fjoru
Z
% 10%
(10% 20% = 0.5)


X Y
Y X

oLrqX dheka
xhxbZek=kkea
si zfr' kr i fjoru
Z
oLrqY dhdher esai fzr' kr i fjoru
Z

X Y Y X
20% X 20% 10% = 2)
X Y Y X

59

II

i fwrZdhxbZek=kkea
si zfr' kr i fjoru
Z
dher ea
si zfr' kr i fjoru
Z

15000 10000 10000


500 400 400

5000 10000
100 400

1/ 2 1/ 4 2

III


l eL; k %
I Q/PxP/Q Q/P

P
P/Q
Po Q o

P2 Q 2

P3Q3

Po P1 OQ OQ OQ P/Q
o
3
2
PoP1 P/Q P0P1
P/Q P0P1 Q/P
P0 P1

Q/P dQ/dP
P/Q (dQ/dPxP/
Q)

60


Y
D
P0 P2

P3

Price

P1

Q1
D1
Q2Q3
Quantity Demanded
Q0

Q/P=dQ/dP=
Y
OP1 OP2 OP3
OQ0
Q/P=dQ/dP=oc (infinite)
(infinite)

X
(infinity) OP0

Y
Y

Price

Price

p3
p2

P0

p1

Q0
Quantity Demanded

Q0 Q1

Q2

Q3

Quantity Demanded



P/O Q/P

dQ/dP
(Rectangular hyperbola)

61


ABCO, EFHO JKLO
ABCO = OC
x BC EFHO JKLO FH KL

Price

F
K

D1
0

C
H
L
Quantity Demanded


P/Q

P1+Po

Po+P1
Qo+Q1

P/Q 2
P1 Po
2
2
Q1+Qo Q1 Q1

QQQ
0 P 1

P P

P P Q1 Q0
Q Q

P P

1
1
0
P P Q Q
0
1
1
0

62

Po=10 P1=8 Qo=1000 Qo=1500


Q Q

P P

1
1
0
P P Q Q
0
1
1
0

8 10
1500 1000

10 8
1500 1000

500 18 9

1.8
2 2500 5

P/Q
10

Po Qo P/Q 1000

500 10

2.5 P /Q
1
1
2 1000

500
8

4 / 3 1.33 P/Q
2 1500

P/Q
P/Q

PoP1
Po P1
P1 Po
Y
D
P0 P2
Price

P3

P1

Q1
D1
Q2Q3
Quantity Demanded
Q0


dQ P

dP Q
63

dQ

dP

dQ

dP

(reciprocal)

dQ
dQ
C F
dP
dP

(Tangent)

Y
D

Price

C
E

F
D1

A B
Quantity Demanded


D D1 C C P/Q

CA
OA

D D1

dQ
EF

dP
CE

EF CA

CE OA

AD1 CA
EF AD1

[CEF CAD1
]
CA OA
CE CA

AD1
OA

CD1
[CA DO CA, OD1 DD1 AD1/
CD

OA = CD1/DC]

64

CD1
CD

C CD1 DD CD

o dknk; kaHkkx
o dkck; kaHkkx


P/Q

dQ
dP

DD1 P TR
P DD1 P

PR
PR

Price

P
D1

R
Quantity Demanded


IV

(infinity)

dQ P

dP Q
DD1 (dP/dQ) (Reciprocal)
(dQ/dP) P/Q (infinity)
P/Q D1 X D
Y D1 e=O D
e=

65

Y
D

e=
e >1

Price

e=1
A

e<1
C

e=0
D1
Quantity Demanded


A (e=1)
AD1 AD A D
(e>1) B BD1
BD B
A D1 (e<1)
C DD1 CD1 CD C


dQ P

dP Q
D1D1 D2D2 dQ/dP
PQ

PQ

2 2
1 1
P/Q D1D1 D2D2 OQ < OQ
2
1
D1D1 D2D2

dQ P

dP Q
5.11

dQ
P/Q
dP

D1D1 D2D2 P2Q/OQ>P1Q/OQ


D1D1 D2D2
66

Y
D2
D2

D1
Price

D1
P1

Price

P2
P2

Q1
Q2 D1
D2
Quantity Demanded

P1

Q
D1 D2
Quantity Demanded


dQ P

dP Q
dQ

dP P/Q P1
P2 OZ OQ1P1 OQ2 P2
p1Q1
PQ
2 2
OQ1
OQ2


Y
D2
Z
D1
Price

P2
P1

Q1 Q2
0

D1

Quantity Demanded

D2
X

P1 P2
(Y


P2 D2
P1 D1 OP
PP2 OD2 P D PD

PD
2
1

67

P1 D1

P2 D 2

DD2 P2 P D DD1 P1 PD P2
2
1
P1


P1 D1

QD1

P2 D 2

QD 2

P2Q OD PD OQ P D OQ
1
2

Y

Price

P1

P2
D2

D1

Quantity Demanded

QD2
OQ

QD

QD

QD

PD

PD

1
2
1
2 2
1 1
OQ OQ OQ P D P D
2
1


Y
D

Price

P2
P1
D1
0

Q
Quantity Demanded

D2
X

P1 P2 (Y-

(X

68


Y
D2

Price

D1

P2
P1

Q
Quantity Demanded

D X


PD

PD

QD

PD

2
1
2
P2Q OD2 P D = P D = OQ P2 P D
2 2
1 1
2 2

P1 D

P1 P D P1 P2
1

D1D D2D


P P/Q

dQ

dP


Y
D1
D2
P

D1

D2

Quantity Demanded

dQ
D1D1 D2D2
dP

P D1D1 D2D2

69

II

I

II


Y
D

Price

S
P0

S
0

D
q0
Quantity Demanded

P OPo Oqo
Oqo
OPo

Price

D
D1

P0
P1
D
D1

S
0

q1 q0
Quantity Demanded

70

DD D1D1 OPo Op1


Oqo Oq1

Y' D
S

P0

P0

P1
D1 D
0

q0

D
D1

Price

Y D
D1

q1

q0

D1 D
X

P0
P1
S
0

q1 q0

D
D1
X

Quantity Demanded/Supplied

(A) DD
Opo Op1 Oqo (B)
PoS Opo Oqo Oq1
(C)

D1

Price

S
P1
P0
D1

S
D
0

q1

q0

Quantity Demanded/Supplied

71

DD D1D1 Opo Op1


Oqo Oq1

(A) (B) (A)


Opo Oqo Oq1 (B)
Oqo


(A)
Y
D

(B)
D1

D1
D

P0

Price

Price

S
S

PP1 0

D1
D
0

q0

q1

D1
D

Quantity Demanded/Supplied

q0

X
Quantity Demanded/Supplied


S1

Price

P1
P0
S1
S

D
q1

q0

Quantity Demanded/Supplied

SS S1S1 Opo Op1


Oqo Oq1

72


(A)

(B)

S1

S1

D
Price

Price

P0

S1

S1
S

S
0

P0

q1

q0

q0

Quantity Demanded/Supplied

Quantity Demanded/Supplied

(A) Opo Oqo


Oq1 (B) Opo
Op1 Oqo


(A)

(B)
S

Price

Price

P0
P1
S

S1
0

S1
q0

S
S1

S1

S1

P0
P1

Price

(C)
S

q0 q1
0
Quantity Demanded/Supplied

73

P0

D
S
S1
0

q0

q1

(A)
C),
Oqo Oq1 Opo B),

DD SS Opo
Oqo
Op1 Oq2q1
Op2 q3q4


Y
D
S

Price

P1
P0
P2
S
0

D
q3 q2 q0 q4 q1

Quantity Demanded/Supplied

III

74

Opo Op1

Op2
Oq1 Oq2
q1q2

Y
D

Price

P1
P0
P2
S
0

D
q1 q0 q2 q3

Quantity Demanded/Supplied

Opo Op1
Oqo Oq1

S1S1
Oq2
qoq1 q2q1

75


Y
S
S1

Price

P0
P1
D

S1
0

q2

q0

q1

Quantity Demanded/Supplied

(Support price or floor price),

Pop2
SS S1S1 S1S1

Op1 Oq1

(=pop1) (=pop2)
pop3 pop1 pop3
76


pop1/pop3

Price

D
P2
P1
P0
P3

S1
S

S1
D

q0
q1
Quantity Demanded

SS pop1
S1S1

P1
P0

S1
S

S1
q0

S1
S

P0

D1

S1
S

(C)

S1

P2
P1
P0

S
0

(B)

D1
Price

Price

(A)

Price

S1

D
q1 q2 q0

S
X

q1

q0

Quantity Demanded/Supplied

(A) Op1 Opo


(C)

(B)

(DD D1D1) D1D1 DD


DD D1D1
77

IV

78

SS
DD
Opo Oqo
Oq2 Oq1 Oq2 Oq1
Oq2 Op2 Oq1
Op1 Oq2 Oq1

Y

D
A

Price

P2

P0

E
B

P1
S

D
q2

q1

q0

Quantity Demanded/Supplied

Price

D
A

P2
P0
P1

E
B
D

S
0
q2 q0 q1
Quantity Demanded/Supplied

79

Oq1 qoq1)
Oq2 (q2qo)
Oqo)
??OqoxOpo

Oq2 Oq2xOp2 Oq2Ap2


Op0 q2qo Oq2xOpo
Oq2bpo Opo
Op1 Op1xOq1 Oq1Bp1
Op0Oq1xOq0
Oq1 Opo

80

Price

D
P2
P0
P1

A
E
H

C
B
D

S
0
q2 q0 q1
Quantity Demanded/Supplied

81


S0

D0 D D2

S1

S2

Price

P0
P1
P2

A
B
C
S0 S
1
D D2
D0 1

S2
q0

q1

q2

Quantity Demanded/Supplied

DoDoSoSo
S1S1 S2S2

DoDo D1D1 SoSo S1S1 D1D1


D2D2 S1S1 S2S2 D1D1 S1S1
B Op1 Op0
D2D2 S2S2 C Op2 Op1

82