07-Individual Demand

07-Individual Demand - Applying Consumer Theory: Individual...

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1 Applying Consumer Theory: Individual Demand Reading: Chapter 4
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2 Individual Demand: Price Changes For each price change, we can  determine how much of the good  consumer would purchase given her  budget constraint and preferences We can trace out the individual demand  curve for food by holding income and the  price of clothing constant, and varying  the price of food 
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3 Individual Demand: Price Changes Each price leads to different amounts of food purchased 5 U 3 D 4 U 2 B 12 20 Assume: I = $20 P C = $2 P F = $2, $1, $0.50 Food (units per month) Clothing 6 A U 1 4 10
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4 Individual Demand: Price Changes The Price- Consumption Curve traces out the utility maximizing market basket for each price of food 4 U 2 B 12 20 5 U 3 D Food (units per month) Clothing 6 A U 1 4 10
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Individual Demand: Price Changes By changing prices  and showing what  the consumer will  purchase, we can  create a demand  schedule and  demand curve for the  individual. Demand Schedule
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07-Individual Demand - Applying Consumer Theory: Individual...

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