Table of Contents
2. BUDGET CONSTRAINT ................................................................................................................................ 8
2.1 THE BUDGET CONSTRAINT ....................................................................................................................................8
2.2 TWO GOODS ARE OFTEN ENOUGH .........................................................................................................................8
2.3 PROPERTIES OF THE BUDGET LINE ..........................................................................................................................8
2.4 HOW THE BUDGET LINE CHANGES ..........................................................................................................................9
2.5 THE NUMERAIRE ..............................................................................................................................................10
2.6 TAXES, SUBSIDIES, AND RATIONING ......................................................................................................................11
Belas&ngen ...................................................................................................................................................11
Subsidies .......................................................................................................................................................11
Rantsoeneringen ..........................................................................................................................................12
Example: The supplemental nutri&on assistance program ...........................................................................12
2.7 BUDGET LINE CHANGES .....................................................................................................................................13
3. PREFERENCES .......................................................................................................................................... 14
3.1 CONSUMER PREFERENCES ..................................................................................................................................14
3.2 ASSUMPTIONS ABOUT PREFERENCES ....................................................................................................................14
3.3 INDIFFERENCE CURVES ......................................................................................................................................15
3.4 EXAMPLES OF PREFERENCES ...............................................................................................................................16
Perfect subs&tutes ........................................................................................................................................16
Perfect complements ....................................................................................................................................16
Bads ..............................................................................................................................................................17
Neutrals ........................................................................................................................................................17
Sa&a&on (verzadiging)..................................................................................................................................18
Discrete goods ..............................................................................................................................................18
3.5 WELL-BEHAVED PREFERENCES ............................................................................................................................18
Niet convexe preferen&es .............................................................................................................................19
3.6 THE MARGINAL RATE OF SUBSTITUTION.................................................................................................................19
3.7 OTHER INTERPRETATIONS OF THE MRS ................................................................................................................20
3.8 BEHAVIOR OF THE MRS ....................................................................................................................................20
Perfecte subs&tuten ......................................................................................................................................20
Perfecte complementen ................................................................................................................................20
4. UTILITY .................................................................................................................................................... 21
De nutsfunc&e ..............................................................................................................................................21
ORDINAAL NUT .....................................................................................................................................................21
Monotone transforma&e ..............................................................................................................................21
4.1 CARDINAL UTILITY ............................................................................................................................................22
4.2 CONSTRUCTING A UTILITY FUNCTION ....................................................................................................................22
De nutsfunc&e ..............................................................................................................................................23
4.3 SOME EXAMPLES OF UTILITY FUNCTIONS ...............................................................................................................23
Perfect subs&tutes ........................................................................................................................................23
Perfect complements ....................................................................................................................................24
Quasilineair preferences ...............................................................................................................................24
Cobb-Douglas preferences ............................................................................................................................24
4.4 MARGINAL UTILITY ...........................................................................................................................................24
4.5 MARGINAL UTILITY AND MRS ............................................................................................................................25
Example: Cobb-Douglas preferences ............................................................................................................26
4.6 AN EXAMPLE FROM THE ELECTRIC VEHICLE INDUSTRY ...............................................................................................28
5. CHOICE .................................................................................................................................................... 29
5.1 OPTIMAL CHOICE .............................................................................................................................................29
Well - Behaved Preferences ..........................................................................................................................29
1
, Niet convexe preferen&es .............................................................................................................................30
5.2 CONSUMER DEMAND ........................................................................................................................................30
5.3 SOME EXAMPLES..............................................................................................................................................31
Perfect subs&tutes ........................................................................................................................................31
Perfect complements ....................................................................................................................................31
Neutrals and bads ........................................................................................................................................32
Discrete goods ..............................................................................................................................................32
Concave preferences .....................................................................................................................................32
Solving the preference Maximiza&on problem .............................................................................................33
Cobb-Douglass preferences ..........................................................................................................................33
5.4 USING A UTILITY FUNCTION TO ESTIMATE THE WELFARE IMPACT OF PRICE CHANGE .........................................................33
5.5 IMPLICATIONS OF THE MRS CONDITION................................................................................................................33
5.6 CHOOSING TAXES .............................................................................................................................................34
6. DEMAND ................................................................................................................................................. 35
6.1 NORMAL AND INFERIOR GOODS ..........................................................................................................................35
6.2 INCOME-OFFER CURVES AND ENGEL CURVES .........................................................................................................35
6.3 SOME EXAMPLES..............................................................................................................................................36
Perfect subs&tutes ........................................................................................................................................36
Perfect complements ....................................................................................................................................36
Cobb-Douglas preferences ............................................................................................................................36
Homothe&c preferences ...............................................................................................................................37
Quasilineair preferences ...............................................................................................................................37
6.4 ORDINARY GOODS AND GIFFEN GOODS .................................................................................................................38
6.5 THE PRICE-OFFER CURVE AND THE DEMAND CURVE ................................................................................................39
6.6 SOME EXAMPLES..............................................................................................................................................39
Perfect subs&tutes ........................................................................................................................................39
Perfect complements ....................................................................................................................................40
Cobb-Douglas ...............................................................................................................................................40
6.7 SUBSTITUES AND COMPLEMENTS .........................................................................................................................40
Example: electric cars and gasoline ..............................................................................................................40
6.8 THE INVERSE DEMAND FUNCTION ........................................................................................................................40
8. SLUTSKY EQUATION ................................................................................................................................. 42
8.1 THE SUBSTITUTION EFFECT (SE) ..........................................................................................................................42
Example: calcula&ng the subs&tu&on effect .................................................................................................43
8.2 THE INCOME EFFECT (IE) ...................................................................................................................................43
Example: calcula&ng the income effect ........................................................................................................44
8.3 SIGN OF THE SUBSTITUTION EFFECT ......................................................................................................................44
8.4 THE TOTAL CHANGE IN DEMAND ..........................................................................................................................45
8.5 RATES OF CHANGE ............................................................................................................................................45
8.6 THE LAW OF DEMAND .......................................................................................................................................45
8.7 EXAMPLES OF INCOME AND SUBSTITUTION EFFECTS ................................................................................................46
Perfecte complementen ................................................................................................................................46
Perfecte subs&tuten ......................................................................................................................................46
Quasilineaire preferen&es ............................................................................................................................46
Example: the consumers price index and subs&tu&on bias ..........................................................................46
Example: carbon taxes and revenue recycling ..............................................................................................46
8.8 ANOTHER SUBSTITUTION EFFECT .........................................................................................................................46
8.9 COMPENSATED DEMAND CURVES ........................................................................................................................46
15. MARKET DEMAND ................................................................................................................................. 47
15.1 FROM INDIVIDUAL TO MARKET DEMAND .............................................................................................................47
15.2 THE INVERSE DEMAND FUNCTION ......................................................................................................................47
Example: adding up ‘linear’ demand ............................................................................................................47
15.3 DISCRETE GOODS ...........................................................................................................................................48
15.4 THE EXTENSIVE AND THE INTENSIVE MARGIN........................................................................................................48
2
, 15.5 ELASTICITY ....................................................................................................................................................48
Example: the elas&city of a linear demand curve .........................................................................................48
15.6 ELASTICITY AND DEMAND ................................................................................................................................49
15.7 ELASTICITY AND REVENUE ................................................................................................................................49
Example: short-run versus long-run demand elas&city.................................................................................50
15.8 CONSTANT ELASTICITY DEMANDS .......................................................................................................................50
15.9 ELASTICITY AND MARGINAL REVENUE .................................................................................................................50
Example: seXng a price................................................................................................................................51
15.10 MARGINAL REVENUE CURVES .........................................................................................................................51
15.11 INCOME ELASTICITY ......................................................................................................................................51
10. INTERTEMPORAL CHOICE ....................................................................................................................... 53
Het intertemporeel model ............................................................................................................................53
10.1 THE BUDGET CONSTRAINT ................................................................................................................................53
Geval 1. consument kan niet lenen, niet sparen ...........................................................................................53
Geval 2: consument kan sparen, maar niet lenen.........................................................................................54
Geval 3: consument kan lenen, maar niet sparen.........................................................................................54
Geval 4: consument kan lenen en sparen .....................................................................................................54
Geval 5: consument kan lenen en sparen .....................................................................................................54
10.2 PREFERENCES FOR CONSUMPTION .....................................................................................................................55
Perfecte subs&tuten ......................................................................................................................................55
Perfecte complementen ................................................................................................................................55
10.3 COMPARATIVE STATICS ....................................................................................................................................56
Startsitua&e 1: consument spaart ................................................................................................................56
Startsitua&e 2: consument leent...................................................................................................................56
Conclusie.......................................................................................................................................................57
10.4 THE SLUTSKY EQUATION AND INTERTEMPORAL CHOICE ..........................................................................................57
10.5 INFLATION ....................................................................................................................................................57
10.6 PRESENT VALUE: A CLOSER LOOK .......................................................................................................................57
10.7 ANALYZING PRESENT VALUE FOR SEVERAL PERIODS ................................................................................................57
10.8 USE OF PRESENT VALUE ...................................................................................................................................57
10.9 BONDS ........................................................................................................................................................57
10.10 TAXES ........................................................................................................................................................57
10.11 CHOICE OF THE INTEREST RATE ........................................................................................................................57
12. UNCERTAINTY ........................................................................................................................................ 58
12.1 CONTINGENT CONSUMPTION ...........................................................................................................................58
De con&ngente budgetrechte .......................................................................................................................58
Verzekering ...................................................................................................................................................58
12.2 UTILITY FUNCTIONS AND PROBABILITIES ..............................................................................................................59
Example: Some Examples of U&lity Func&ons ..............................................................................................59
12.3 EXPECTED UTILITY ..........................................................................................................................................60
12.4 WHY EXPECTED UTILITY IS REASONABLE ..............................................................................................................60
12.5 RISK AVERSION ..............................................................................................................................................60
Example: The Demand of Insurance .............................................................................................................61
Example: Risk Aversion and Job Offers .........................................................................................................61
Verzekeringspremie in een compe&&eve markt ............................................................................................61
12.6 DIVERSIFICATION............................................................................................................................................61
12.7 RISK SPREADING ............................................................................................................................................62
12.8 ROLE OF THE STOCK MARKET ............................................................................................................................62
Example: Inves&ng in a Risky Asset ..............................................................................................................62
19. TECHNOLOGY......................................................................................................................................... 63
19.1 INPUTS AND OUTPUTS .....................................................................................................................................63
19.2 DESCRIBING TECHNOLOGICAL CONSTRAINTS ........................................................................................................63
19.3 EXAMPLES OF TECHNOLOGY .............................................................................................................................64
Perfecte subs&tuten ......................................................................................................................................64
3
, Vaste propor&es............................................................................................................................................64
Cobb-Douglas ...............................................................................................................................................64
19.4 PROPERTIES OF TECHNOLOGY ...........................................................................................................................65
19.5 THE MARGINAL PRODUCT ................................................................................................................................65
19.6 THE TECHNICAL RATE OF SUBSTITUTION ..............................................................................................................66
19.7 DIMINISHING MARGINAL PRODUCT ....................................................................................................................66
19.8 DIMINISHING TECHNICAL RATE OF SUBSTITUTION ..................................................................................................66
19.9 THE LONG RUN AND SHORT RUN .......................................................................................................................67
Op de Lange Termijn .....................................................................................................................................67
Op de Korte Termijn ......................................................................................................................................67
19.10 RETURNS TO SCALE .......................................................................................................................................67
Example: datacenters ...................................................................................................................................67
Example: copy exactly ...................................................................................................................................67
20. PROFIT MAXIMIZATION ......................................................................................................................... 68
20.1 PROFITS .......................................................................................................................................................68
20.2 THE ORGANIZATION OF FIRMS ...........................................................................................................................68
20.3 PROFITS AND STOCK MARKET VALUE ...................................................................................................................68
20.4 THE BOUNDARIES OF THE FIRM .........................................................................................................................68
20.5 FIXED AND VARIABLE FACTORS ..........................................................................................................................68
20.6 SHORT-RUN PROFIT MAXIMIZATION ...................................................................................................................69
20.7 COMPARATIVE STATICS ....................................................................................................................................69
20.8 PROFIT MAXIMIZATION IN THE LONG RUN ............................................................................................................70
Example: profit maximiza&on with Cobb-Douglas produc&on .....................................................................70
20.9 INVERSE FACTOR DEMAND CURVES.....................................................................................................................71
20.10 PROFIT MAXIMIZATION AND RETURNS TO SCALE..................................................................................................71
20.11 REVEALED PROFITABILITY ...............................................................................................................................71
Example: How do farmers react to price supports? ......................................................................................71
20.12 COST MINIMIZATION .....................................................................................................................................72
21. COST MINIMIZATION ............................................................................................................................. 73
Winstmaximalisa&e in 2 stappen .................................................................................................................73
21.1 COST MINIMIZATION .......................................................................................................................................73
De condi&onele factorvraag .........................................................................................................................74
Example: Minimizing costs for specific technologies ....................................................................................74
21.2 REVEALED COST MINIMIZATION .........................................................................................................................75
21.3 RETURNS TO SCALE AND THE COST FUNCTION.......................................................................................................75
1. Constante Return of Scale .........................................................................................................................75
2. Increasing Return of Scale ........................................................................................................................75
3. Decreasing Return of Scale .......................................................................................................................75
21.4 LONG-RUN AND SHORT-RUN COSTS ...................................................................................................................76
Korte termijn kostenfunc&e ..........................................................................................................................76
Lange termijn kostenfunc&e .........................................................................................................................76
21.5 FIXED AND OVERHEAD COSTS ............................................................................................................................77
21.6 SUNK COSTS ..................................................................................................................................................77
22. COST CURVES ......................................................................................................................................... 78
22.1 AVERAGE COSTS ............................................................................................................................................78
22.2 MARGINAL COSTS ..........................................................................................................................................78
22.3 MARGINAL COSTS AND VARIABEL COSTS ..............................................................................................................79
Example: specific cost curves ........................................................................................................................79
Example: marginal cost curves for two plants ..............................................................................................79
22.4 COST CURVES FOR ONLINE AUCTIONS .................................................................................................................79
22.5 LONG-RUN COSTS ..........................................................................................................................................80
Korte-termijn kostenfunc&e ..........................................................................................................................80
Op de Lange-termijn .....................................................................................................................................80
22.6 DISCRETE LEVELS OF PLANT SIZE ........................................................................................................................80
4
, 22.7 LONG-RUN MARGINAL COSTS ...........................................................................................................................80
23. FIRM SUPPLY.......................................................................................................................................... 81
23.1 MARKET ENVIRONMENTS ................................................................................................................................81
23.2 PURE COMPETITION........................................................................................................................................81
23.3 THE SUPPLY DECISION OF A COMPETITIVE FIRM .....................................................................................................82
23.4 AN EXCEPTION...............................................................................................................................................83
23.5 ANOTHER EXCEPTION ......................................................................................................................................83
23.6 THE INVERSE SUPPLY FUNCTION ........................................................................................................................84
23.7 PROFITS AND PRODUCER’S SURPLUS ...................................................................................................................84
23.8 THE LONG-RUN SUPPLY CURVE OF A FIRM ...........................................................................................................84
23.9 OVERHEAD COSTS IN THE LONG-RUN .................................................................................................................84
23.10 LONG-RUN CONSTANT AVERAGE COSTS .............................................................................................................84
24. INDUSTRY SUPPLY .................................................................................................................................. 85
24.1 SHORT-RUN INDUSTRY SUPPLY ..........................................................................................................................85
24.2 INDUSTRY EQUILIBRIUM IN THE SHORT RUN .........................................................................................................85
24.3 INDUSTRY EQUILIBRIUM IN THE LONG RUN ..........................................................................................................85
24.4 THE LONG-RUN SUPPLY CURVE..........................................................................................................................86
Example: Taxa&on in the Long run and in the Short run ...............................................................................87
24.5 THE MEANING OF ZERO PROFITS ........................................................................................................................87
24.6 FIXED FACTORS AND ECONOMIC RENT .................................................................................................................87
Example: Taxi licenses in New York City ........................................................................................................87
24.7 WHAT DETERMINES ECONOMIC RENT .................................................................................................................87
24.8 THE POLITICS OF RENT .....................................................................................................................................87
Example: Liquor licenses in Boston ...............................................................................................................87
24.9 INDUSTRY SUPPLY WITH DIFFERENT TECHNOLOGIES: ELECTRICITY GENERATION ............................................................87
16. EQUILIBRIUM......................................................................................................................................... 88
16.1 SUPPLY ........................................................................................................................................................88
16.2 MARKET EQUILIBRIUM ....................................................................................................................................88
16.3 TWO SPECIAL CASES ........................................................................................................................................89
16.4 INVERSE DEMAND AND SUPPLY CURVES ...............................................................................................................89
Example: Equilibrium with linear curves .......................................................................................................89
16.5 COMPARATIVE STATICS ....................................................................................................................................89
Example: Shiking both curves ......................................................................................................................90
16.6 TAXES ..........................................................................................................................................................90
The geometry of the situa&on ......................................................................................................................91
Example: Taxa&on with linear demand and supply ......................................................................................92
16.7 PASSING ALONG A TAX ....................................................................................................................................92
Example: Who pays for an import tarrif .......................................................................................................92
16.8 THE DEADWEIGHT LOSS OF A TAX .......................................................................................................................94
Example: The welfare consequences of the Trump trade war ......................................................................94
16.9 PARETO EFFICIENCY ........................................................................................................................................94
Example: Wai&ng in line ...............................................................................................................................94
14. CONSUMER’S SURPLUS .......................................................................................................................... 95
14.1 DEMAND FOR A DISCRETE GOOD .......................................................................................................................95
14.2 CONSTRUCTING UTILITY FROM DEMAND .............................................................................................................95
14.3 OTHER INTERPRETATIONS OF CONSUMER’S SURPLUS..............................................................................................96
14.4 FROM CONSUMER’S SURPLUS TO CONSUMERS’ SURPLUS ........................................................................................96
14.5 APPROXIMATING A CONTINUOUS DEMAND ..........................................................................................................96
14.6 QUASILINEAR UTILITY ......................................................................................................................................96
14.7 INTERPRETING THE CHANGE IN CONSUMER’S SURPLUS ...........................................................................................97
Example: The change in consumer’s surplus ................................................................................................97
14.8 COMPENSATING AND EQUIVALENT VARIATION ......................................................................................................97
14.9 PRODUCER’S SURPLUS.....................................................................................................................................97
5
, 14.10 BENEFIT-COST ANALYSIS ................................................................................................................................98
Example: The distribu&onal consequences of higher gasoline taxes ............................................................98
Example: Valuing travel &me ........................................................................................................................98
25. MONOPOLY ........................................................................................................................................... 99
Monopolie ....................................................................................................................................................99
25.1 MAXIMIZING PROFITS ...................................................................................................................................100
Marginale opbrengst en elas&citeit ............................................................................................................100
25.2 LINEAR DEMAND CURVE AND MONOPOLY ..........................................................................................................101
25.3 MARKUP PRICING ........................................................................................................................................101
Voorbeeld: Lineaire marktvraag .................................................................................................................102
Example: The impact of taxes and incomplete pass-through .....................................................................102
Example: Chinese import compe&&on and firm markups ...........................................................................102
25.4 INEFFICIENCY OF MONOPOLY .........................................................................................................................102
25.5 DEADWEIGHT LOSS OF MONOPOLY ..................................................................................................................103
25.6 PATENTS ....................................................................................................................................................103
Example: The op&mal life of a patent .........................................................................................................103
Example: Patent thickets ............................................................................................................................103
25.7 NATURAL MONOPOLY ...................................................................................................................................104
Minimum efficient scale .............................................................................................................................105
25.8 WHAT CAUSES MONOPOLIES ..........................................................................................................................105
26. MONOPOLY BEHAVIOR .........................................................................................................................106
De monopolis&sche concurren&e................................................................................................................106
26.1 PRICE DISCRIMINATION..................................................................................................................................107
Basis prijsstrategie......................................................................................................................................107
Prijsstrategieën ...........................................................................................................................................107
26.2 FIRST-DEGREE PRICE DISCRIMINATION ..............................................................................................................108
Voorwaarden voor prijsdiscrimina&e..........................................................................................................108
Example: first-degree price discrimina&on in prac&ce ................................................................................108
26.3 SECOND-DEGREE PRICE DISCRIMINATION ...........................................................................................................109
Example: price discrimina&on in airfares....................................................................................................110
Example: prescrip&on drug prices ..............................................................................................................110
26.4 THRID-DEGREE PRICE DISCRIMINATION .............................................................................................................111
Example: linear demand curves ..................................................................................................................111
Example: calcula&ng op&mal price discrimina&on .....................................................................................111
26.5 BUNDLING ..................................................................................................................................................111
Example: sokware suites ............................................................................................................................111
26.6 TWO-PART TARIFFS .......................................................................................................................................112
Voorbeeld: het ‘Disneyland’ dilemma .........................................................................................................112
26.7 MONOPOLISTIC COMPETITION ........................................................................................................................112
Vergelijking met LT evenwicht in perfecte compe&& ..................................................................................114
26.8 A LOCATION MODEL OF PRODUCT DIFFERENTIATION ............................................................................................114
28. OLIGOPOLY ...........................................................................................................................................115
Oligopolie ...................................................................................................................................................115
28.1 CHOOSING A STRATEGY .................................................................................................................................116
Evenwicht in een oligopolische markt.........................................................................................................116
Marktmodellen ...........................................................................................................................................116
Example: price matching ............................................................................................................................117
28.2 QUANTITY LEADERSHIP ..................................................................................................................................117
28.3 PRICE LEADERSHIP ........................................................................................................................................118
28.4 COMPARING PRICE LEADERSHIP AND QUANTITY LEADERSHIP ..................................................................................119
28.5 SIMULTANEOUS QUANTITY SETTLING ................................................................................................................120
Van onevenwicht naar evenwicht ...............................................................................................................120
28.6 AN EXAMPLE OF COURNOT EQUILIBIRUM ..........................................................................................................121
28.7 ADJUSTMENT TO EQUILIBRIUM .......................................................................................................................121
6
2. BUDGET CONSTRAINT ................................................................................................................................ 8
2.1 THE BUDGET CONSTRAINT ....................................................................................................................................8
2.2 TWO GOODS ARE OFTEN ENOUGH .........................................................................................................................8
2.3 PROPERTIES OF THE BUDGET LINE ..........................................................................................................................8
2.4 HOW THE BUDGET LINE CHANGES ..........................................................................................................................9
2.5 THE NUMERAIRE ..............................................................................................................................................10
2.6 TAXES, SUBSIDIES, AND RATIONING ......................................................................................................................11
Belas&ngen ...................................................................................................................................................11
Subsidies .......................................................................................................................................................11
Rantsoeneringen ..........................................................................................................................................12
Example: The supplemental nutri&on assistance program ...........................................................................12
2.7 BUDGET LINE CHANGES .....................................................................................................................................13
3. PREFERENCES .......................................................................................................................................... 14
3.1 CONSUMER PREFERENCES ..................................................................................................................................14
3.2 ASSUMPTIONS ABOUT PREFERENCES ....................................................................................................................14
3.3 INDIFFERENCE CURVES ......................................................................................................................................15
3.4 EXAMPLES OF PREFERENCES ...............................................................................................................................16
Perfect subs&tutes ........................................................................................................................................16
Perfect complements ....................................................................................................................................16
Bads ..............................................................................................................................................................17
Neutrals ........................................................................................................................................................17
Sa&a&on (verzadiging)..................................................................................................................................18
Discrete goods ..............................................................................................................................................18
3.5 WELL-BEHAVED PREFERENCES ............................................................................................................................18
Niet convexe preferen&es .............................................................................................................................19
3.6 THE MARGINAL RATE OF SUBSTITUTION.................................................................................................................19
3.7 OTHER INTERPRETATIONS OF THE MRS ................................................................................................................20
3.8 BEHAVIOR OF THE MRS ....................................................................................................................................20
Perfecte subs&tuten ......................................................................................................................................20
Perfecte complementen ................................................................................................................................20
4. UTILITY .................................................................................................................................................... 21
De nutsfunc&e ..............................................................................................................................................21
ORDINAAL NUT .....................................................................................................................................................21
Monotone transforma&e ..............................................................................................................................21
4.1 CARDINAL UTILITY ............................................................................................................................................22
4.2 CONSTRUCTING A UTILITY FUNCTION ....................................................................................................................22
De nutsfunc&e ..............................................................................................................................................23
4.3 SOME EXAMPLES OF UTILITY FUNCTIONS ...............................................................................................................23
Perfect subs&tutes ........................................................................................................................................23
Perfect complements ....................................................................................................................................24
Quasilineair preferences ...............................................................................................................................24
Cobb-Douglas preferences ............................................................................................................................24
4.4 MARGINAL UTILITY ...........................................................................................................................................24
4.5 MARGINAL UTILITY AND MRS ............................................................................................................................25
Example: Cobb-Douglas preferences ............................................................................................................26
4.6 AN EXAMPLE FROM THE ELECTRIC VEHICLE INDUSTRY ...............................................................................................28
5. CHOICE .................................................................................................................................................... 29
5.1 OPTIMAL CHOICE .............................................................................................................................................29
Well - Behaved Preferences ..........................................................................................................................29
1
, Niet convexe preferen&es .............................................................................................................................30
5.2 CONSUMER DEMAND ........................................................................................................................................30
5.3 SOME EXAMPLES..............................................................................................................................................31
Perfect subs&tutes ........................................................................................................................................31
Perfect complements ....................................................................................................................................31
Neutrals and bads ........................................................................................................................................32
Discrete goods ..............................................................................................................................................32
Concave preferences .....................................................................................................................................32
Solving the preference Maximiza&on problem .............................................................................................33
Cobb-Douglass preferences ..........................................................................................................................33
5.4 USING A UTILITY FUNCTION TO ESTIMATE THE WELFARE IMPACT OF PRICE CHANGE .........................................................33
5.5 IMPLICATIONS OF THE MRS CONDITION................................................................................................................33
5.6 CHOOSING TAXES .............................................................................................................................................34
6. DEMAND ................................................................................................................................................. 35
6.1 NORMAL AND INFERIOR GOODS ..........................................................................................................................35
6.2 INCOME-OFFER CURVES AND ENGEL CURVES .........................................................................................................35
6.3 SOME EXAMPLES..............................................................................................................................................36
Perfect subs&tutes ........................................................................................................................................36
Perfect complements ....................................................................................................................................36
Cobb-Douglas preferences ............................................................................................................................36
Homothe&c preferences ...............................................................................................................................37
Quasilineair preferences ...............................................................................................................................37
6.4 ORDINARY GOODS AND GIFFEN GOODS .................................................................................................................38
6.5 THE PRICE-OFFER CURVE AND THE DEMAND CURVE ................................................................................................39
6.6 SOME EXAMPLES..............................................................................................................................................39
Perfect subs&tutes ........................................................................................................................................39
Perfect complements ....................................................................................................................................40
Cobb-Douglas ...............................................................................................................................................40
6.7 SUBSTITUES AND COMPLEMENTS .........................................................................................................................40
Example: electric cars and gasoline ..............................................................................................................40
6.8 THE INVERSE DEMAND FUNCTION ........................................................................................................................40
8. SLUTSKY EQUATION ................................................................................................................................. 42
8.1 THE SUBSTITUTION EFFECT (SE) ..........................................................................................................................42
Example: calcula&ng the subs&tu&on effect .................................................................................................43
8.2 THE INCOME EFFECT (IE) ...................................................................................................................................43
Example: calcula&ng the income effect ........................................................................................................44
8.3 SIGN OF THE SUBSTITUTION EFFECT ......................................................................................................................44
8.4 THE TOTAL CHANGE IN DEMAND ..........................................................................................................................45
8.5 RATES OF CHANGE ............................................................................................................................................45
8.6 THE LAW OF DEMAND .......................................................................................................................................45
8.7 EXAMPLES OF INCOME AND SUBSTITUTION EFFECTS ................................................................................................46
Perfecte complementen ................................................................................................................................46
Perfecte subs&tuten ......................................................................................................................................46
Quasilineaire preferen&es ............................................................................................................................46
Example: the consumers price index and subs&tu&on bias ..........................................................................46
Example: carbon taxes and revenue recycling ..............................................................................................46
8.8 ANOTHER SUBSTITUTION EFFECT .........................................................................................................................46
8.9 COMPENSATED DEMAND CURVES ........................................................................................................................46
15. MARKET DEMAND ................................................................................................................................. 47
15.1 FROM INDIVIDUAL TO MARKET DEMAND .............................................................................................................47
15.2 THE INVERSE DEMAND FUNCTION ......................................................................................................................47
Example: adding up ‘linear’ demand ............................................................................................................47
15.3 DISCRETE GOODS ...........................................................................................................................................48
15.4 THE EXTENSIVE AND THE INTENSIVE MARGIN........................................................................................................48
2
, 15.5 ELASTICITY ....................................................................................................................................................48
Example: the elas&city of a linear demand curve .........................................................................................48
15.6 ELASTICITY AND DEMAND ................................................................................................................................49
15.7 ELASTICITY AND REVENUE ................................................................................................................................49
Example: short-run versus long-run demand elas&city.................................................................................50
15.8 CONSTANT ELASTICITY DEMANDS .......................................................................................................................50
15.9 ELASTICITY AND MARGINAL REVENUE .................................................................................................................50
Example: seXng a price................................................................................................................................51
15.10 MARGINAL REVENUE CURVES .........................................................................................................................51
15.11 INCOME ELASTICITY ......................................................................................................................................51
10. INTERTEMPORAL CHOICE ....................................................................................................................... 53
Het intertemporeel model ............................................................................................................................53
10.1 THE BUDGET CONSTRAINT ................................................................................................................................53
Geval 1. consument kan niet lenen, niet sparen ...........................................................................................53
Geval 2: consument kan sparen, maar niet lenen.........................................................................................54
Geval 3: consument kan lenen, maar niet sparen.........................................................................................54
Geval 4: consument kan lenen en sparen .....................................................................................................54
Geval 5: consument kan lenen en sparen .....................................................................................................54
10.2 PREFERENCES FOR CONSUMPTION .....................................................................................................................55
Perfecte subs&tuten ......................................................................................................................................55
Perfecte complementen ................................................................................................................................55
10.3 COMPARATIVE STATICS ....................................................................................................................................56
Startsitua&e 1: consument spaart ................................................................................................................56
Startsitua&e 2: consument leent...................................................................................................................56
Conclusie.......................................................................................................................................................57
10.4 THE SLUTSKY EQUATION AND INTERTEMPORAL CHOICE ..........................................................................................57
10.5 INFLATION ....................................................................................................................................................57
10.6 PRESENT VALUE: A CLOSER LOOK .......................................................................................................................57
10.7 ANALYZING PRESENT VALUE FOR SEVERAL PERIODS ................................................................................................57
10.8 USE OF PRESENT VALUE ...................................................................................................................................57
10.9 BONDS ........................................................................................................................................................57
10.10 TAXES ........................................................................................................................................................57
10.11 CHOICE OF THE INTEREST RATE ........................................................................................................................57
12. UNCERTAINTY ........................................................................................................................................ 58
12.1 CONTINGENT CONSUMPTION ...........................................................................................................................58
De con&ngente budgetrechte .......................................................................................................................58
Verzekering ...................................................................................................................................................58
12.2 UTILITY FUNCTIONS AND PROBABILITIES ..............................................................................................................59
Example: Some Examples of U&lity Func&ons ..............................................................................................59
12.3 EXPECTED UTILITY ..........................................................................................................................................60
12.4 WHY EXPECTED UTILITY IS REASONABLE ..............................................................................................................60
12.5 RISK AVERSION ..............................................................................................................................................60
Example: The Demand of Insurance .............................................................................................................61
Example: Risk Aversion and Job Offers .........................................................................................................61
Verzekeringspremie in een compe&&eve markt ............................................................................................61
12.6 DIVERSIFICATION............................................................................................................................................61
12.7 RISK SPREADING ............................................................................................................................................62
12.8 ROLE OF THE STOCK MARKET ............................................................................................................................62
Example: Inves&ng in a Risky Asset ..............................................................................................................62
19. TECHNOLOGY......................................................................................................................................... 63
19.1 INPUTS AND OUTPUTS .....................................................................................................................................63
19.2 DESCRIBING TECHNOLOGICAL CONSTRAINTS ........................................................................................................63
19.3 EXAMPLES OF TECHNOLOGY .............................................................................................................................64
Perfecte subs&tuten ......................................................................................................................................64
3
, Vaste propor&es............................................................................................................................................64
Cobb-Douglas ...............................................................................................................................................64
19.4 PROPERTIES OF TECHNOLOGY ...........................................................................................................................65
19.5 THE MARGINAL PRODUCT ................................................................................................................................65
19.6 THE TECHNICAL RATE OF SUBSTITUTION ..............................................................................................................66
19.7 DIMINISHING MARGINAL PRODUCT ....................................................................................................................66
19.8 DIMINISHING TECHNICAL RATE OF SUBSTITUTION ..................................................................................................66
19.9 THE LONG RUN AND SHORT RUN .......................................................................................................................67
Op de Lange Termijn .....................................................................................................................................67
Op de Korte Termijn ......................................................................................................................................67
19.10 RETURNS TO SCALE .......................................................................................................................................67
Example: datacenters ...................................................................................................................................67
Example: copy exactly ...................................................................................................................................67
20. PROFIT MAXIMIZATION ......................................................................................................................... 68
20.1 PROFITS .......................................................................................................................................................68
20.2 THE ORGANIZATION OF FIRMS ...........................................................................................................................68
20.3 PROFITS AND STOCK MARKET VALUE ...................................................................................................................68
20.4 THE BOUNDARIES OF THE FIRM .........................................................................................................................68
20.5 FIXED AND VARIABLE FACTORS ..........................................................................................................................68
20.6 SHORT-RUN PROFIT MAXIMIZATION ...................................................................................................................69
20.7 COMPARATIVE STATICS ....................................................................................................................................69
20.8 PROFIT MAXIMIZATION IN THE LONG RUN ............................................................................................................70
Example: profit maximiza&on with Cobb-Douglas produc&on .....................................................................70
20.9 INVERSE FACTOR DEMAND CURVES.....................................................................................................................71
20.10 PROFIT MAXIMIZATION AND RETURNS TO SCALE..................................................................................................71
20.11 REVEALED PROFITABILITY ...............................................................................................................................71
Example: How do farmers react to price supports? ......................................................................................71
20.12 COST MINIMIZATION .....................................................................................................................................72
21. COST MINIMIZATION ............................................................................................................................. 73
Winstmaximalisa&e in 2 stappen .................................................................................................................73
21.1 COST MINIMIZATION .......................................................................................................................................73
De condi&onele factorvraag .........................................................................................................................74
Example: Minimizing costs for specific technologies ....................................................................................74
21.2 REVEALED COST MINIMIZATION .........................................................................................................................75
21.3 RETURNS TO SCALE AND THE COST FUNCTION.......................................................................................................75
1. Constante Return of Scale .........................................................................................................................75
2. Increasing Return of Scale ........................................................................................................................75
3. Decreasing Return of Scale .......................................................................................................................75
21.4 LONG-RUN AND SHORT-RUN COSTS ...................................................................................................................76
Korte termijn kostenfunc&e ..........................................................................................................................76
Lange termijn kostenfunc&e .........................................................................................................................76
21.5 FIXED AND OVERHEAD COSTS ............................................................................................................................77
21.6 SUNK COSTS ..................................................................................................................................................77
22. COST CURVES ......................................................................................................................................... 78
22.1 AVERAGE COSTS ............................................................................................................................................78
22.2 MARGINAL COSTS ..........................................................................................................................................78
22.3 MARGINAL COSTS AND VARIABEL COSTS ..............................................................................................................79
Example: specific cost curves ........................................................................................................................79
Example: marginal cost curves for two plants ..............................................................................................79
22.4 COST CURVES FOR ONLINE AUCTIONS .................................................................................................................79
22.5 LONG-RUN COSTS ..........................................................................................................................................80
Korte-termijn kostenfunc&e ..........................................................................................................................80
Op de Lange-termijn .....................................................................................................................................80
22.6 DISCRETE LEVELS OF PLANT SIZE ........................................................................................................................80
4
, 22.7 LONG-RUN MARGINAL COSTS ...........................................................................................................................80
23. FIRM SUPPLY.......................................................................................................................................... 81
23.1 MARKET ENVIRONMENTS ................................................................................................................................81
23.2 PURE COMPETITION........................................................................................................................................81
23.3 THE SUPPLY DECISION OF A COMPETITIVE FIRM .....................................................................................................82
23.4 AN EXCEPTION...............................................................................................................................................83
23.5 ANOTHER EXCEPTION ......................................................................................................................................83
23.6 THE INVERSE SUPPLY FUNCTION ........................................................................................................................84
23.7 PROFITS AND PRODUCER’S SURPLUS ...................................................................................................................84
23.8 THE LONG-RUN SUPPLY CURVE OF A FIRM ...........................................................................................................84
23.9 OVERHEAD COSTS IN THE LONG-RUN .................................................................................................................84
23.10 LONG-RUN CONSTANT AVERAGE COSTS .............................................................................................................84
24. INDUSTRY SUPPLY .................................................................................................................................. 85
24.1 SHORT-RUN INDUSTRY SUPPLY ..........................................................................................................................85
24.2 INDUSTRY EQUILIBRIUM IN THE SHORT RUN .........................................................................................................85
24.3 INDUSTRY EQUILIBRIUM IN THE LONG RUN ..........................................................................................................85
24.4 THE LONG-RUN SUPPLY CURVE..........................................................................................................................86
Example: Taxa&on in the Long run and in the Short run ...............................................................................87
24.5 THE MEANING OF ZERO PROFITS ........................................................................................................................87
24.6 FIXED FACTORS AND ECONOMIC RENT .................................................................................................................87
Example: Taxi licenses in New York City ........................................................................................................87
24.7 WHAT DETERMINES ECONOMIC RENT .................................................................................................................87
24.8 THE POLITICS OF RENT .....................................................................................................................................87
Example: Liquor licenses in Boston ...............................................................................................................87
24.9 INDUSTRY SUPPLY WITH DIFFERENT TECHNOLOGIES: ELECTRICITY GENERATION ............................................................87
16. EQUILIBRIUM......................................................................................................................................... 88
16.1 SUPPLY ........................................................................................................................................................88
16.2 MARKET EQUILIBRIUM ....................................................................................................................................88
16.3 TWO SPECIAL CASES ........................................................................................................................................89
16.4 INVERSE DEMAND AND SUPPLY CURVES ...............................................................................................................89
Example: Equilibrium with linear curves .......................................................................................................89
16.5 COMPARATIVE STATICS ....................................................................................................................................89
Example: Shiking both curves ......................................................................................................................90
16.6 TAXES ..........................................................................................................................................................90
The geometry of the situa&on ......................................................................................................................91
Example: Taxa&on with linear demand and supply ......................................................................................92
16.7 PASSING ALONG A TAX ....................................................................................................................................92
Example: Who pays for an import tarrif .......................................................................................................92
16.8 THE DEADWEIGHT LOSS OF A TAX .......................................................................................................................94
Example: The welfare consequences of the Trump trade war ......................................................................94
16.9 PARETO EFFICIENCY ........................................................................................................................................94
Example: Wai&ng in line ...............................................................................................................................94
14. CONSUMER’S SURPLUS .......................................................................................................................... 95
14.1 DEMAND FOR A DISCRETE GOOD .......................................................................................................................95
14.2 CONSTRUCTING UTILITY FROM DEMAND .............................................................................................................95
14.3 OTHER INTERPRETATIONS OF CONSUMER’S SURPLUS..............................................................................................96
14.4 FROM CONSUMER’S SURPLUS TO CONSUMERS’ SURPLUS ........................................................................................96
14.5 APPROXIMATING A CONTINUOUS DEMAND ..........................................................................................................96
14.6 QUASILINEAR UTILITY ......................................................................................................................................96
14.7 INTERPRETING THE CHANGE IN CONSUMER’S SURPLUS ...........................................................................................97
Example: The change in consumer’s surplus ................................................................................................97
14.8 COMPENSATING AND EQUIVALENT VARIATION ......................................................................................................97
14.9 PRODUCER’S SURPLUS.....................................................................................................................................97
5
, 14.10 BENEFIT-COST ANALYSIS ................................................................................................................................98
Example: The distribu&onal consequences of higher gasoline taxes ............................................................98
Example: Valuing travel &me ........................................................................................................................98
25. MONOPOLY ........................................................................................................................................... 99
Monopolie ....................................................................................................................................................99
25.1 MAXIMIZING PROFITS ...................................................................................................................................100
Marginale opbrengst en elas&citeit ............................................................................................................100
25.2 LINEAR DEMAND CURVE AND MONOPOLY ..........................................................................................................101
25.3 MARKUP PRICING ........................................................................................................................................101
Voorbeeld: Lineaire marktvraag .................................................................................................................102
Example: The impact of taxes and incomplete pass-through .....................................................................102
Example: Chinese import compe&&on and firm markups ...........................................................................102
25.4 INEFFICIENCY OF MONOPOLY .........................................................................................................................102
25.5 DEADWEIGHT LOSS OF MONOPOLY ..................................................................................................................103
25.6 PATENTS ....................................................................................................................................................103
Example: The op&mal life of a patent .........................................................................................................103
Example: Patent thickets ............................................................................................................................103
25.7 NATURAL MONOPOLY ...................................................................................................................................104
Minimum efficient scale .............................................................................................................................105
25.8 WHAT CAUSES MONOPOLIES ..........................................................................................................................105
26. MONOPOLY BEHAVIOR .........................................................................................................................106
De monopolis&sche concurren&e................................................................................................................106
26.1 PRICE DISCRIMINATION..................................................................................................................................107
Basis prijsstrategie......................................................................................................................................107
Prijsstrategieën ...........................................................................................................................................107
26.2 FIRST-DEGREE PRICE DISCRIMINATION ..............................................................................................................108
Voorwaarden voor prijsdiscrimina&e..........................................................................................................108
Example: first-degree price discrimina&on in prac&ce ................................................................................108
26.3 SECOND-DEGREE PRICE DISCRIMINATION ...........................................................................................................109
Example: price discrimina&on in airfares....................................................................................................110
Example: prescrip&on drug prices ..............................................................................................................110
26.4 THRID-DEGREE PRICE DISCRIMINATION .............................................................................................................111
Example: linear demand curves ..................................................................................................................111
Example: calcula&ng op&mal price discrimina&on .....................................................................................111
26.5 BUNDLING ..................................................................................................................................................111
Example: sokware suites ............................................................................................................................111
26.6 TWO-PART TARIFFS .......................................................................................................................................112
Voorbeeld: het ‘Disneyland’ dilemma .........................................................................................................112
26.7 MONOPOLISTIC COMPETITION ........................................................................................................................112
Vergelijking met LT evenwicht in perfecte compe&& ..................................................................................114
26.8 A LOCATION MODEL OF PRODUCT DIFFERENTIATION ............................................................................................114
28. OLIGOPOLY ...........................................................................................................................................115
Oligopolie ...................................................................................................................................................115
28.1 CHOOSING A STRATEGY .................................................................................................................................116
Evenwicht in een oligopolische markt.........................................................................................................116
Marktmodellen ...........................................................................................................................................116
Example: price matching ............................................................................................................................117
28.2 QUANTITY LEADERSHIP ..................................................................................................................................117
28.3 PRICE LEADERSHIP ........................................................................................................................................118
28.4 COMPARING PRICE LEADERSHIP AND QUANTITY LEADERSHIP ..................................................................................119
28.5 SIMULTANEOUS QUANTITY SETTLING ................................................................................................................120
Van onevenwicht naar evenwicht ...............................................................................................................120
28.6 AN EXAMPLE OF COURNOT EQUILIBIRUM ..........................................................................................................121
28.7 ADJUSTMENT TO EQUILIBRIUM .......................................................................................................................121
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