`
`
`
`SEVENTEENTH EDITION
`
`C‘K'NOMICS
`
`a:';v:
`
`
`
`,____UELSON .fi. NORDHw
`
` l .
`
`Page 1 0f3
`
`x-;
`
`.7
`“ r.
`
`.
`
`’
`
`\.
`
`_,
`
`‘
`
`.-
`
`.
`
`..4
`
`..
`
`‘
`
`“iileifit2176
`' ylan v. Biogen
`IPR 2018—01403
`
`

`

`_______o______
`
`ECONOMICS
`
`Seventeenth Edition
`
`PAUL A. SAMUELSON
`
`Institute Professor Emeritus
`
`Massachusetts Institute of Technology
`
`WILLIAM D. NORDHAUS
`
`A. Whitney Griswold Professor of Economics
`Yale University
`
`ll
`L
`r'
`
`I
`McGraw-HIII
`I
`lrwm
`
`Boston Burr Ridge, IL Dubuque, IA Madison. WI New York San Francisco St. Louis
`Bangkok Bogota’ Caracas Kuala Lumpur Lisbon London Madrid Mexico City
`Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto
`PageZof 3
`
`

`

`THE DEMAND CURVE
`
`49
`
`customers through the substitution effect. In addition,
`a price reducdon will induce extra purchases of goods
`by exiscing 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.
`
`.
`
`The explosive growth
`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
`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 mosc 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 decades.As 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. In the late I990s.
`
`as the value of computers increased with the development
`of the lntemet. yet more people iumped on the computer
`bandwagon. Worldwide. PC sales totaled about
`IOO mil-
`lion in I999.
`
`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
`
`tiexploslve growth in computer output.
`
`.
`'
`
`‘r'
`‘w
`
`
`
`i
`
`
`
`
`flakes or gasoline or compurers? A whole array of fac-
`{fora influences how much will be demanded at a
`. Population,
`the prices and availability of related
`"15. individual and social
`tastes, and special
`in—
`
`viduals tend to buy more of almost everything, even
`if prices don't change. Automobile purchases tend
`to rise sharply with higher levels of income.
`0 The size of the 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 [s-
`land's 1 million people.
`0 The prices and availability of related goods influ-
`ence the demand for a commodity. A particu-
`larly important connecdon exists among sub-
`stitute goods—ones that tend to perform the
`same funcuon, such as cornflakes and oatmeal,
`
`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,
`if the price 'of computers
`falls, will that increase or decrease the demand
`
`for typewriters?)
`0 In addition to these objective elements. there
`is a set of subjective elements called tastes or
`preferences. Tastes represent a variety of Cultural
`and historical influences. They may reflecc 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 curried jellyfish is a deli-
`cacy in japan but would make many Americans
`gag).
`0 Finally. special influences will affect 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
`
`in NewYork. where public transportation is plen-
`tiful and parking is a nightmare. In addition, ex-
`pecmtions abOut future economic conditions,
`particularly prices, may have an important im-
`paCL on demand.
`
`The determinants of demand are summarized in
`
`Table 3-2. which uses automobiles as an example.
`
`
`
`nant of demand. As peoples incomes rise.
`Page 3 of 3
`
`
`
`Shifts in Demand
`As economic life evolves. demand changes inces-
`sandy. Demand curves sit still only in textbooks.
`
`indi-
`
`