review - Review for the final 1. Demand and Supply...

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Review for the final 1. Demand and Supply Equilibrium, Shifts in demand and supply and new equilibrium. o Remember: The supply curve also represents the minimum price that sellers accept (marginal cost) and the demand curve represents willingness to pay (reservation price). 2. Budget Constraint Shift of the budget line and rotation of the budget line (when income or prices change). Other changes in the budget (lump-sum tax/subsidy, coupons) 3. Consumer Theory Preferences o Indifference Curves for goods/bad/neutral commodities. o Indifference Curves for Cobb-Douglas, min function (perfect complements), linear (perfect substitutes), and quasi-linear preferences. Utility functions o Identify the type of preferences (e.g. linear utility function implies perfect substitutes) o Marginal Utility, Marginal Rate of Substitution o Optimal Choice (Utility maximization) ± Use the tangency condition and the budget constraint. ± Corner solution for perfect substitutes. ± For perfect complements use, in place of the tangency condition, the equation of the line that connects all the corner points of the indifference curves. Demand
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This note was uploaded on 08/08/2008 for the course ECON 301 taught by Professor Hansen during the Spring '08 term at Wisconsin.

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review - Review for the final 1. Demand and Supply...

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