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2-16-09

# 2-16-09 - For every extra 4 dollars I have I will consume 1...

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Microeconomics – Class Notes – 2/16/09 Preferences + Budget Constraint Deriving Demand, Engel, Inverse Demand, Indifference Curves Helps us to determine which bundle we will consume as income increases: Income-consumption = income expansion path = income-offer curve all the same thing Formula for inverse demand curve, engel curve, and demand curve all depends on what you are using M = (Px*X) /a MEMORIZE

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Direct relationship between income and quantity demanded of good X ENGEL CURVE What is on the left hand side and what am I holding constant helps to determine which equation goes with what demand, inverse demand, engel

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Unformatted text preview: For every extra 4 dollars I have, I will consume 1 extra unit of X: • Remember, anytime you have a constant for the marginal rate of substitution (slope of the indifference curve), you have perfect substitutes DOES NOT have to be (-1)! • Remember, with perfect substitutes, the change in the quantity demanded of one of the goods (either X or Y) is ALL due to either: the substitution effect OR the income effect. • With the perfect complements, the change in the quantity demanded of one of the goods (either X or Y) is ALL due to the income effect NO PROBLEMS DUE WED....
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