Chapter nine Buying and Selling
Chapter Nine Buying and Selling
Structure Endowments Budget constraints with endowments Net demands Labor supply
Structure Endowments Budget constraints with endowments Net demands Labor supply
Buying and selling Trade involves exchange when something is bought something else must be sold What will be bought? What will be sold? Who will be a buyer? who will be a seller?
Buying and Selling Trade involves exchange -- when something is bought something else must be sold. What will be bought? What will be sold? Who will be a buyer? Who will be a seller?
Buying and Selling And how are incomes generated How does the value of income depend upon commodity prices? How can we put all this together to explain better how price changes affect demands?
Buying and Selling And how are incomes generated? How does the value of income depend upon commodity prices? How can we put all this together to explain better how price changes affect demands?
Endowments The list of resource units with which a consumer starts is his endowment (禀赋) A consumer's endowment will be denoted by the vector a omega)
Endowments The list of resource units with which a consumer starts is his endowment （禀赋）. A consumer’s endowment will be denoted by the vector (omega).
Endowments Eg.O=(01,O2)=(10,2) states that the consumer is endowed with 10 units of good 1 and 2 units of good 2
Endowments E.g. states that the consumer is endowed with 10 units of good 1 and 2 units of good 2. = ( , ) = ( , ) 1 2 10 2
Endowments Eg.O=(01,O2)=(10,2) states that the consumer is endowed with 10 units of good 1 and 2 units of good 2. What is the endowments value? For which consumption bundles may it be exchanged?
Endowments E.g. states that the consumer is endowed with 10 units of good 1 and 2 units of good 2. What is the endowment’s value? For which consumption bundles may it be exchanged? = ( , ) = ( , ) 1 2 10 2
Endowments p1=2 and p2 =3 so the value of the endowment(@1,02)=(10, 2)is p1a+p2O2=2×10+3×2=26 Q: For which consumption bundles may the endowment be exchanged? A: For any bundle costing no more than the endowment's value
Endowments p1=2 and p2=3 so the value of the endowment is Q: For which consumption bundles may the endowment be exchanged? A: For any bundle costing no more than the endowment’s value. ( , ) ( , ) 1 2 = 10 2 p1 1 + p2 2 = 2 10 + 3 2 = 26
Budget Constraints revisited So, given p, and p2, the budget constraint for a consumer with an endowment (@1,@2)is p1X1+p2X2=p1a1+p202 The budget set is {(x1,x2)P1x1+p2x2≤p11+P2O2, X1≥0,x≥0
Budget Constraints Revisited So, given p1 and p2 , the budget constraint for a consumer with an endowment is The budget set is ( , ) 1 2 p1 x1 + p2 x2 = p1 1 + p2 2 . ( , ) , , . x x p x p x p p x x 1 2 1 1 2 2 1 1 2 2 1 0 2 0 + +
Budget Constraints revisited x2 p1X1+p2X2=p1o1+p202
Budget Constraints Revisited x2 1 x1 2 p1 x1 + p2 x2 = p11 + p22