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`SEVENTEENTH EDITION
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`_U ELSON .5 NORDHA.
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`y. n'éEN 2290, pg. 1
`Phigenix v. Immunogen
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`IMMUNOGEN 2290, pg. 1
`Phigenix v. Immunogen
`IPR2014-00676
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`—_—___—0—_—_
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`ECONOMICS
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`Seventeenth Edition
`
`PAUL A. SAMUELSON
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`Institute Professor Emeritus
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`Massachusetts Institute of Technology
`
`WILLIAM D. NORDHAUS
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`A. Whitney Griswold Professor of Economics
`Yale University
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`it
`“‘
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`McGraw-Hill
`Irwin
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`IL Dubuque, IA Madison, Wl New York San Francisco St. Louis
`Boston Burr Ridge,
`Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City
`Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto
`IMMUNOGEN 2290, pg. 2
`Phigenix v. Immunogen
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`IMMUNOGEN 2290, pg. 2
`Phigenix v. Immunogen
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`THE DEMAND CURVE
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`49
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`customers through the substitution effect. In addition,
`a price reduction will induce extra purchases of goods
`by existing consumers through both the income and
`the substitution effects. Conversely, a rise in the price
`of a good will cause some of us to buy less.
`
`viduals tend to buy mo re of almost eve ryming, even
`if prices don’t change. Automobile purchases tend
`to rise shaiply with higher levels of income.
`The size oft/12 market—measured, say, by the pop—
`ulation—clearly affects
`the market demand
`curve. California’s 32 million people tend to buy
`32 times more apples and cars than do Rhode Is-
`land’s 1 million people.
`The prices and availability of related goods influ—
`ence the demand for a commodity. A particu—
`larly important connection exists among sub—
`stitute goods—ones that tend to perform the
`same function, such as cornflakes and oatmeal,
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`pens and pencils, small cars and large cars, or
`oil and natural gas. Demand for good A tends
`to be low if the price ofsubstitute product B is
`low.
`(For example, I the price ‘of computers
`falls, will that increase or decrease the demand
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`
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`for typewriters?)
`In addition to these objective elements. there
`is a set of subjective elements called taste: or
`preferences. Tastes represent a variety of cultural
`and historical influences. They may reflect gen—
`uine psychological or physiological needs (for
`liquids, love, or excitement). And they may in-
`clude artificially contrived cravings (for ciga-
`rettes, drugs, or fancy sports cars). They may
`also contain a large element of tradition or re«
`ligion {eating beef is popular in America but
`taboo in India, while curriedjellyfish is a deli—
`cacy in japan but would make many Americans
`gag).
`Finally, special influmcaswill afiect the demand for
`particular goods. The demand for umbrellas is
`high in rainy Seattle but low in sunny Phoenix;
`the demand for air conditioners will rise in hot
`weather; the demand for automobiles will be low
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`in NewYOrk, where public transportation is plen—
`tiful and parking is a nightmare. In addition, ex-
`peCtations about future economic conditions,
`pardcularly prices, may have an important im—
`pact on demand.
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`The determinants of demand are summarized in
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`Table 3—2, which uses automobiles as an example.
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`Shifts in Demand
`As economic life evolves, demand changes inces—
`santly. Demand curves sit still only in textbooks.
`IMMUNOGEN 2290, Pg. 3
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`F“ I
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`The explosive growth
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`in computer demand
`We can illustrate the law of downward—slop-
`ing demand for the case of personal com-
`puters (PCs).The prices of the first PCs were
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`high. and their computing power was relatively
`modest.They were found in few businesses and even
`fewer homes.
`It
`is hard to believe that just 20 years ago
`studenu wrote most of their papers in longhand and did
`most calculations by hand or with simple calculators.
`But the prices of computing power fell sharply over
`the last two decadesAs the prices fell, new buyers were
`enticed to buy their first computers. PCs came to be widely
`used for work. for school, and for fun.
`ln the late |990s,
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`as the value of computers increased with the development
`of the lnternet. yet more people iumped on the computer
`bandwagonWorldwide. F'C sales totaled about
`lOO mil-
`lion in I999.
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`Figure 3-3 shows the prices and quantities of com—
`puters and peripheral equipment in the United States as
`calculated by government statisticians. The prices reflect
`the cost of purchasing computers with constant quality—
`that is, they take into account the rapid quality change of
`the average computer purchased. You can see how falling
`prices along with improved software, increased utility of
`the Internet and e—mail. and other factors have led to an
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`explosive growth in computer output.
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`Forces behind the Demand Curve
`Whatdetermines the market demand curve for corn—
`flaltes or gasoline or computers? A whole array of fac-
`tors ianUences how much will be demanded at a
`given price: average levels of income, the size of the
`Population,
`the prices and availability of related
`geods,
`individual and sociai
`tastes, and special
`in—
`Iluences.
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`The average income of consumers IS a key deterrru—
`nant of demand. As people’s incomes rise,
`indi-
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`IMMUNOGEN 2290, pg. 3
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