4 Demand

# 4 Demand - 4 INDIVIDUAL AND MARKET DEMAND Econ 100A...

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INDIVIDUAL AND MARKET DEMAND 4 Econ 100A Mortimer 9/4/2009 1

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INDIVIDUAL DEMAND The price of food changes, but income and the price of clothing are fixed The consumer chooses a different market basket. price-consumption curve Curve tracing the utility-maximizing combinations of two goods as the price of one changes. individual demand curve Curve relating the quantity of a good that a single consumer will buy to its price . Econ 100A Mortimer 9/4/2009 2 The Effects of a Price Change Food Clothing P Food P F =\$1 P F =\$2 P F =\$4
INDIVIDUAL DEMAND EXERCISE: Deriving Individual Demand Curve Q: A consumer has the utility function U(F,C)=CF, where C is the amount of clothing and F is the amount of food. The price of clothing is P C and the price of food is P F , and income is I. Show that the demand curve for food is F=I/(2P F ). A: . Econ 100A Mortimer 9/4/2009 3

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INDIVIDUAL DEMAND Income changes, but the price of food and the price of clothing are fixed The consumer chooses a different market basket. income-consumption curve Curve tracing the utility-maximizing combinations of two goods as the income changes. Econ 100A Mortimer 9/4/2009 4 The Effects of a Change in Income Food Clothing P Food I=\$92 I=\$68 I=\$40
INDIVIDUAL DEMAND Normal versus Inferior Goods Normal good A good that a consumer purchases of as income rises. E

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## This note was uploaded on 10/26/2009 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at Berkeley.

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4 Demand - 4 INDIVIDUAL AND MARKET DEMAND Econ 100A...

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