After writing the last two posts, I picked up a popular university textbook for first-year economics students, Gregory Mankiw's Principles of Economics, and had a look. I am not familiar with this book because I am not responsible for teaching principles of economics (the first economics course) in my university. I actually got the book from a former colleague. When he left, he gave me as a gift.
I surprisingly discovered that the treatments of demand curves in DSE economics syllabus can be exactly found in this (authoritative) textbook. First, it introduces the law of demand without explaining it. Second, it explains why aggregate demand (AD) curve is downward-sloping exactly by the three reasons required by the DSE syllabus: wealth effect, interest rate and export. I wonder, especially for AD, DSE simply follows this authoritative textbook's treatments. Thus, perhaps I shouldn't blame the DSE syllabus. It simply follows what the authority does.
Even so, I still think DSE should explain the reasons behind the law of demand in microeconomics. I will not be deterred by Mankiw's authority in economics teaching so as to change my view in this aspect. I still think the law of demand should be explained and there are ways to explain it in a non-technical manner. For example, written also for principles courses, Robert H. Frank and Ben S. Bernanke's Principles of Economics explains the law of demand in a very simple manner in its Chapter 3. Basically, it is still substitution effect and income effect:
"Thus, as pizza becomes more expensive, a consumer may switch to chicken sandwiches, hamburgers, or other foods that substitute for pizza. This is called the substitution effect of a price change. In addition, a price increase reduces the quantity demanded because it reduces purchasing power: A consumer simply can't afford to buy as many slices of pizza at higher prices as at lower prices. This is called the income effect of a price change." (p.61)
You can see: the reasons why demand curve is downward-sloping are as simple as such.
The Frank's and Bernanke's book actually has given the third reason, also very intuitive: everyone has a reservation price for the good a person may buy. If the actual price is higher than one's reservation price, one thinks it is not worthwhile for buying the good. When the price of a good rises, fewer people's reservation prices are higher than the actual price. So, fewer people will buy.
Yes, Frank's and Bernanke's book is slightly more advanced than Mankiw's. In Chapter 5 of the former book, it actually introduces a more detailed analysis of demand, using concepts of marginal utility. I think high schools need not go through the more advanced (or abstract) concepts like marginal utility. I think high schools need only to introduce something like Chapter 3 of the book, and it is sufficient to introduce only substitution and income effects as brief as above. The fact that Mankiw has not explained the law of demand so does not mean we don't need to. The fact that Frank and Bernanke is a slightly more advanced book does not mean that we should avoid following it in some selective aspects.
Of course, no any textbooks are perfect. I also will not rely on only one book for my comments. For example, Frank and Bernanke introduces a very peculiar AD curve, which plots inflation rate (not price level) against output. This is not the usual AD curve concept, which links price level with output. To me, which aspect should be taught should not be based purely on authority, but on some carefully thought reasons. I hope that when the DSE syllabus is under review one day, the law of demand is given some explanations.
I have been teaching economics at a university in Hong Kong for more than ten years. This blog is created to serve two types of readers: those who have taken economics in high schools, and those who are laymen but are interested in economics. This blog is named "hi, economics" because it represents my welcome message to economics learners (say "Hi" to you) and posts in this blog will not require more than what one can learn from a typical high-school economics course.
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