MiniSchedule2Spring08 - There are two ways to measure the...

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1 Economics 313-1 Cornell U. Talia Bar Spring 2008 Intermediate Microeconomics Mini Schedule 2 The Consumer - continued Consumer Choice (Chapter 5) Consumer utility maximization problem Interior solution, the MRS=p 1 /p 2 condition Corner solution Optimal choice with Cobb-Douglas Perfect complements Perfect substitutes Quasi-linear Demand (Chapters 6, 8) Demand Comparative statics Change in income: Normal and inferior goods Income offer curve and Engle curve Luxury good and necessary good Homothetic preferences Change in other good’s price Gross Substitute, Gross Complement Change in own price Ordinary good, Giffen good Price offer curve, Marshallian demand Substitution effect Hicks substitution effect Slutsky substitution effect Income effect Slutsky Equation (Chapter 8) Law of demand Compensated (Hicks) demand curve Remarks Section 5.6 will not be covered in class but a version of it will likely appear in problem solving.
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Unformatted text preview: There are two ways to measure the substitution effect (SE) of a price change: Hicks SE or Slutsky SE. I will focus in class on the Hicks effect. Chapter 8 in your book mentions both, but focuses on the Slutsky effect. Hence, for this topic the lecture and book are not as closely related, which may be a bit confusing. We will only cover an informal version of the Slutsky Equation: Total effect= Substitution effect + Income effect. In chapter 8, sections you will find most relevant are: introduction and the first half of 8.1 (before reference to the figure 8.1), 8.3, 8.4, 8.6, 8.8, 8.9. Additional reference on Hicks substitution and compensated demand: Nicholson, Microeconomic Theory: basic principles and extensions. Readings from Varian, Intermediate Microeconomics , 6 th . Edition Chapter numbers may vary in the different editions....
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This note was uploaded on 02/23/2008 for the course ECON 3130 taught by Professor Masson during the Spring '06 term at Cornell University (Engineering School).

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