Intermediate Microeconomics: A Modern Approach, Seventh Edition

773 Pages·2005·14.72 MB·English

by  Hal R. Varian

CON TE NTS
Preface
xix
TheM arket
ConstrauM cotdienlg OptimiaznaEdtq iuoinl ibrTihueDm e ­
1 3
manCdu rve TheS uppCluyr ve MarkEeqtu ilibrCioumm­
3 5 7
paraSttiavtei cOst hWeary tsoA lloAcpaatret mentTsh eD is­
9 11
crimitnianMgo nopolistT heO rdinaMroyn opolistR entC ontrol
• • •
WhicWahy I sB est? Pareto EfficiCeonmcpya WraiyntsgoA l­
14 15
locAaptaer tmentEsq uiliibntr hiLeuo mnR gu n Summary
16 17 18
ReviQeuwe stions
19
BudgeCto nstraint
TheB udgCeotn straiTnwtoG oodArsOe f tEenno ugh Prpo­
20 21
ertoifte hsBe u dgSeett How Btuhdeg LeitnC eh angesT he
22 24
NumerairTeax esS,u bsiadniRdea st,i oningEx ampleT:h e
26 26
FoodS tamPpro gramB udgLeitnC eh angesS ummary Review
31 31
Questions
32
CONTENTS
VIII
Preferences
ConsuPmreeerrf encesA ssumpatbiooPunrtse ferencIens­d if
34 35
freenCcuer ves ExamplPersee rfoefn cesP erfcteS ubstitutes
36 37
PerfeCcotm plemtesn Bads NeutralsS atiatioDni screte
• • • • •
Goods Welle-hBavPerdee rfencesT he MarRgaitonefSa ulb stitu­
• 44
tion OthIenrt erproeftt haMetR iSo nsB ehavitohrMe R So f
48 50
Summary ReviQeuwe stions
51 52 52
Utility
CardUitniall itCyo nstrauU cttiilFniugtn yct ioSno mEex am­
57 58
ploefs UtFiulnicttyi onEsx amplIen:d iffeenrcCeu rvefsr omU tility
59
PerfeScutb stitutePse rfeCcotm plementsQ uasiliPnreeafre rences
• •
Cobb-DoluagsP referenceMsa rgiUntaill ityM argiUntaill ity
• • 65
andM RS UtilfioCtro ym mutingS ummary Review
66 67 69
QuestionAsp pendixE xampleC:o bb-DougPlraesf erences
70 70
Choice
OptimChaoli ce ConsuDmeemra nd SomEex amples
73 78 78
Perfect SubstiPteurtfeesCc otm plemtesn Neutraalnsd B ads
• • •
DiscreGtoeo ds ConcavPer eferenceCso bb-DougPlraesf erences
• • •
EstimUattiilFnuigcnt tyi onsI mplicoaftt hiMeoR nSCs o ndition
83 85
ChoosTianxge s Summary ReviQeuwe stionAsp pen-
87 89 89
dix ExampleC:o bb-DougDleamsa ndF unctions
90
Demand
NormaanlId n feGroioodrs IncomeC uOrffveaerns Ed n gCeulr ves
96
SomEex amplesP erfeScutb stitutePse rfeCcotm plements
97 99 •
CobbD-ouglaPsr eferenceHso mothetPirce ferenceQsu asilinear
• • •
PreferencOesrd inaGroyo dansGd i ffGeono ds TheP riOcffee r
• 104
Curavnedt hDee maCnudr ve SomEex amples Perfect
106 107
SubstitutePse rfeCcotm plemtesn A DiscreGtoeo d Substitutes
• • •
anCdo mplementTsh Ien veDresmea Funndc tion Summary
111 112
ReviQeuwe stionAsp pendix
114 115 115
CONTENTISX
RevealPerde ference
7
ThIed eoafR eveaPlreeefrde nce FromR eveaPlreeerdfe tnocPe r­ ef
119
erence RecovePrrienfge rencTehse WAexaiko omfR e­
120 122
vealePdr eferencCeh eckWiARnPg TheS troAnxgi oomf
124 125
ReveaPlreedf erencHeo w Cthoe ck SARPI ndNeuxm bers
128 129
PriIcned ices ExamplIen:d exiSnogc iSaelc uriPtayy ments
130 132
Summary ReviQeuwe stions
135 135
SlutsEkqyu ation
8
ThSeu bstiEtffuetcito nE xampleC:a lculatthieSn ug bstituEtfi-on
137
fectT heI nceo meEcfft ExampleC:a lculatthienI gn comEeff ect
141
Sigonft hSeu bstiEtffuetcito nT heTo taClh anignDe e mand
142 143
Rates of ChTahneLg aewo fD emand ExampolfIe nsc ome
144 147
andS ubstiEtffuetcitosn ExampleR:eb atinag T ax Example:
147
VoluntaRreya lT imeP ricinAgn otShuebrs tiEtffuetcito nC om­
153
pensaDtemeadnC du rves Summary ReviQeuwe stions
155 156 157
Appendix ExamplRee:b atian gS malTla x
157
Buyinagn dS elling
9
Neatn Gdr oDsesm ands TheB udgeCto nstrainCth anging
160 161
thEen dowmentP riCchena ges OffeCru rvaensDd e mand
163 164
Curves TheS lutsky REeqvuiastiitoenUd s oef t he Slut-
167 168
sky EquatiEoxnam ple: CalctuhleEa ntdionwgm enItn comEeff ect
172
Labor SupplThye B udgeCto nstrainCto mpairvSaett atoifc s
173 •
LabSourp ply ExamplOev:e rtime tahneSd u pployfL aborS um-
174
mary ReviQeuwe stionAsp pendix
178 179 179
X CONTENTS
In tertpeomraClh oice
ThBe udgeCto nstrainPtr eferfeoCnroc nessu mptioCno m­
182 185
paraSttiavtei csT heS lutEsqkuya tainoIdn n terteCmhpooircael
186
InflationP resVeanulte A: ColseLro ok Analyz­
187 189 191
inPgr eensVtal ufeo Sre vePrearli odsU soef P resVealnute
193 194
ExalmepV:a luaSi tnrgoe fPa am ymeEnxtapsml Tehe:T ruCeo softa
CredCiatr Bdo nds ExapmlIen:s taLlolamTneasnx tes
197 199
ExalmepS:c ahroslhainSpdas viCnhgosio cfte h Ien teRraetset
200
Summary ReviQeuwe stions
201 201
AsseMta rkets
RatoefRs e turn ArbitarnaPdgr ee sVeanltu e Adjustments
202 204
foDri effrenacmeosnA gs sets AssewtistC ho nsumpRteitounr ns
204
TaxiaotonfA ssReett urns ApplicatioDnesp letable
205 206 207
ReosurceWshe n CtuaotF oresEtx almeGp:a soPlrciiendseu ring
• •
the GuFlifn aWnIacnrisa tli tutioSunmsm ary Review
211 212
QuestionAsp pendix
213 213
Uncertainty
ContitnC goennsumptionE xapmlCea:t apshBteor nodUtsi lity
215
FunctainoPdn rso babilitEixeasl mepS:o mEex almeposfU tility
220
FunctEixopencst ed UtWihlyiE txyp ecUtteidlI isRt eya sonable
221
RisAkv ersion ExapmlTehe:D emafnodr InDsiu­rance
222 224
versificatRiiosSnkp readinRgo loeft hSet oMcakr ket
228 228 229
Summary ReviQeuwe stionAsp pendix Exalmep:
230 230 231
ThEeff ceotf xaTatoinIo nnv esitnRm iesAnkstys ets
RiskAys sets
Mean-VaUrtiialnictey M easuRriisnkg Equiliibnar ium
234 239
MarkfeotRr i sAksys ets HowR etuArdnujss t Exapmle:
241 242
RankMiutnugFa uln Sdusm mary ReviQeuwe stions
246 246
CONTENTXSI
ConsumeSru'rsp lus
14
Demanfrod Dai scGroeotde ConstirnUugtc itlfirtoDyme mand
248
OthIenrt erproeftC aotnisou'nmsSseu rrplus FroCmo n­
249 250
sumeSrur'psl tuoCs o nsu'mS eurrsplusA pproxiam aCtioinnnutg­
251
ouDse mand QuasilUitnielairt yI nterptrheCeth ianngg e in
251 251
Consu'mSseu rrplus ExampleT:h eC hangien C onsumerS'usr plus
252
Compensaantdi nEgq uViaviraalteinotn ExampleC:o mpensating
254
andE q1LivaViaernita tioEnxsa mpleC:o mpensatainndEg q uiavlenVta ri­
atiofno rQ uasilinPeraerf erenPcerso cde'urSsu rplusB enefit-Cost
258
AnalysisR ationi.n CgallcautGianigan nsLd o sses Sum­
260 262
mary ReviQeuwe stionsA ppendix ExampleA:
263 263 264
FewD emandF unctionEsx ampleC:V ,E V,a ndC onsumerS'usr plus
MarkeDte mand
15
FroImn diuvatlioM d arkDeetm and ThIen veDresmea Fnudn ction
266
ExampleA:dd ingU p "LineaDre"m andC urvesD iscGroeotdes
268
TheE xtenasnidtv heIe n tenMsarigvien Elasticity
269 269 270
ExampleT:h eE lasticoifat Lyi neaDre mandC urveE laisttayin cdD e­
mand Elaisttyi cRaenvde nue ExamplSet:r ikaensdP rofits
272 273
ConstEalnats ticity DEelmaasntadinscMd ia tryg iRneavlen ue
276 277
ExamplSee:t tian Pgr iceM argiRneavle nCuuer ves IncoEmlea s­
279
ticityS ummary ReviQeuwe stionAsp pendix
280 281 282 283
ExampleT:h eL affeCru rve ExamApnloet:h eErx pressfioorEn l asticity
Equilibrium
16
Supply MarkEeqtu ilibriTuwmo S pecCiaasle s In-
289 289 290
verDseem aanndSd u ppCluyr ves ExamplEeq:1 lilibwriituLhmi n-
291
earC urvesC omparSattaitviec s ExampleS:h iftinBgo thC urves
293
Taxes ExampleT:a xatiwoint Lhi neaDre manda ndS uplpy Pass­
294
inAgl oanT ga x TheD eadweLiogsohsfat T ax Example:
298 300
TheM arkefto rL oans ExamplFeo:o d SubsiEdxiaemsp lSeu:b sidiine s
IraqP areEtffioc iency ExampleW:a itiinngL ineS ummary
306 309
ReviQeuwe stions
309
XIIC ONTENTS
Auctions
ClassiofifcA autcitoino nsB iddingA uRcutDlieeosnsi gn
312 • 313
OthAeurc tFioromns ExalmeLp:a Btied doinen Bga Eyx apmle:
316
OnlAidnA eu ctPiroonbslw eimtAshu ctionsT hWei nn'eCsru rse
319
Summary ReviQeuwe stions
320 320 321
Technology
InpuatnsdO utputs DescrTiebcihnngo lCoognisctarla ints
322 323
ExampolfTe ecsh nologyF ixPerpdoot rionPsef ercStu bstitutes
324 •
CobDbo-uglParospe rotfTi eecsh nologTyh Mea rgiPnraold uct
• • 326
TheTe chniRcaatolefS ubstitutiDoinm iniMsahrignign al
328 328
Product DiminiTsehcihnnRgia ctoaeflS ubstitutiTohne
329 329
LonRgu na nd SthhoeRr utn RetutronS sc ale Summary
330 330
ReviQeuwe stions
332 333
ProfMiatx imization
Profits ThOer ganiozfFa itrimosn ProfiatnSsdt oMcakr ket
334 336
Value ThBe oundaorfti hFeeis r m FixaendVd a irabFlaec ­
336 338
tors ShortP-rRouMfinat x imizatiCoonm pareSa ttaitvics
339 339
ProMfiatx imiziant LitoohnneRg u n InveFrascetD oerm and
341 342
Curves ProMfiatx imizaantRdie tountr oSn csa le Revealed
343 344
Profittayb iliExapmlHeo:Dw o F armReeratscPo tr iScupepo rts?
345
CosMti nimizatiSounm mary ReviQeuwe stionAsp ­
349 349 350
pendix
351
CosMti nimization
CosMti nimizatiEoxna pmlMei:n imCiozsfirtonS sgpe ciTficech -
353
noolgiReesv eaCloesMdti nimizatiRoent utronS sc aalned the
357
CosFtu nctionL ong-RuSnh oarntdC- oRsutns Fixaendd
358 360
Quasi-CFoisxtesd SunCko sts Summary Review
362 362 363
QuestionAsp pendix
363 364
CONTENTXSI II
CosCtu rves
21
AverCaogset s MargiCnoaslt s MargiCnoasaltn sVd a riable
367 369
Costs ExalmepS:ep ciCfiotcsC urveEsx amMpalgrei:nC aols t
371
Cuerfsvo Trw Pol anLotnsg -CRousnt s DiscLreevtoeelf s n Ptl a
375
Size Long-Run CMoasrtgsi nSaulm mary Review
377 379 380
QuestionAsp pendix
381 381
FirSmu pply
22
MarkEentv ironmenPtusrC eo mpetitiTohne SuDpepcliy­
383 384
sioofanC ompetFiitrimv eA n ExceptiAonno tEhxecre ption
386 388
ExapmlPer:ci iOnpge raStyisntgTe hmeIs n veSruspepF luyn c­
389
tion ProfiatnPsd r oduScuerrp'lsu s ExapmlTeh:Se u pply
391 391
CurfvoaerS pceiCfioscFt u ncTthiLeo onn g-SRuupnpC luyre v oFfi ram
Long-CRounns tAavnetrC aogset s Summary Review
395 397 398
QuestionAsp pendix
399 399
IdnustSruyp ply
23
ShortI-nRduuns try SuIpnpdluyEs qturiyl iibntr hiSeuh moR rutn
401
InduEsqturiyl iibntr hLieou nmRg u n ThLeo ng-Run Supply
402 403
Curve ExalmepT:xa atiinto hnLe o nRgu ann idnt hSeh oRrutn
405
TheM eanionfZg e rPor ofits Fxied FaacntdEo crosn oRmeinct
409
ExalmepT:xa iL iceinnNs eewYsor kC itEyc onoRmeinct
410 412
RentRaalta ensPd r ices ExapmlLei:q Luiocre TnhsePe osl itics
414
ofR ent ExmaplFea:r mtihnGego vernmEenenrtPg oyl icy
415 417
Two-TiPerriecdi PnOrcgiie Cl o ntroTlhEsen titPlrgeormaemn t
• •
Summary ReviQeuwe stions
• 421 422
XIVC ONTENTS
Monopoly
MaximiPzrionfigt s LineDaerm anCdu rvaen dM onopoly
424 425
MarkPurpi cing ExapmlTehe:I mpaofcT tae xso na M onopo­
427
liIsnte fficioefMn ocnyo poly DeadweLiogshsMt o onfo poly
429 431
ExapmlTehe:O ptimLfaieol fa PatEexnaptml Pea:t Tehinctk Neatts-
ural MonopWohlayCt a usMeosn opoliesE?xa mplDei:-
435 437
amonAdrFseo revEexrapm lPeo:o liinAn ugc tMiaornk eEtxsap mle:
PriFciex iinnC go mpuMteemroM rayre ktSsu mmary Review
441
QuestionAsp pendix
442 443
MonopolBye havior
PriDcies criminaFtiiroDsnet g-rPerei ce DiscrimEixn­ation
445 445
ampFliserdt:e- gPrrceiDeei scriimnPiar ncattSiiecocenoD n edg-rPerei ce
Dismcirniation ExalmePp:r iDcies criimnAi infraraetsiE oxn­
448
ampPlrese:cit rpiDornuP grc ieTsh ird-DPergiDrcieese c rimination
452
ExapmlLei:n ear CDueersmvE axnadpm lCea:l cuOlpattiPimrnaig!c e
DiscrimEixnapamltPeiro:in Dc ies crimiinAn caatdiJeoomnui rcn als
BundlingE xapmlSeo:ft wSaurieTt weos- PTaarrti ffs Mo­
457 458
nopolCiosmtpiect itiAoL no caMtoidooenfPl r odDuicffte iraetniton
459
ProdDuicefftr entiatiMoonrV een dors Summary
463 465 466 467
Review Questions
467
FactMoarr kets
Monopiontl hyOe u tpMuatr ket Monopys on ExalmepT:h e
468 471
MinimWuamg Uep straenaDdmo wnstream MonSoupmomlaireys
475
Review QuestAipopnesn dix
477 478 478
CONTENTSX V
Oligopoly
27
ChoosaiS nttgre agy QuantLietayd ershiTph eF oll'osw er
481 481
PorbleTmh Lee ea'rdPsro blePmr iLceea dershiCpo mparing
• • 487
PriLceea dearnsQdhu iapn tLietayd ershiSpi multaQnueaonutsi ty
489
SettingA nE xampolfCe o urEnqouti libriAudmj usttt moe n
489 491
EquilibriMuamn Fyi rimns CoEuqruniolti briSuimm ulta­
493 493
neoPursi ce SettCionlgl usioPnu nhimsenStt rategies
494 495 498
ExamplPer:i Mcaet cahniCdno gme ptitEixoanlm epV:o ltuaEnrxyop rt
RestrCaoimnptarsoi fts hoSeno lutionSsu mmary Review
501 502
Questions
503
GameT heory
28
TheP ayoMffa triaxG aomfe NashE quilibriuMmi xed
504 506
StrategiEesx apmlReo:Pc akp Secri ssT shoer Prisoner's Dilemma
507
RepeaGtaemde s EnofcrinaCg a rtel ExapmlTei:t
509 511 512
froF aitnA irPlricinienS ge queGnatmieasl A Gamoef E ntry
514
DeterrencSeu mmary ReviQeuwe stions
516 518 519
GameA pplications
29
BesRte spoCnusrev es MixeSdtt reagies GameosfC oordi­
520 522
nation Batotftl hSeee xePsr isoner'sA ssDuirlaenmcmea
524 • •
GamesC hickeHno twoC odoirnaGtamee osf C ompetition
• • • 528
GameosfC oexistenGcaem eosfC ommtiment ThFreo agn d
533 535
thSec orpiTohnKe i nKdildypn paerW heSnt reInsWg etahek sns
• •
SaviannSgdos c Sieaclu riHtoyl d BUapr gainingT he
• • • 543
UltimGaatmueSm u mmary ReviQeuwe stions
• 546 547