review_ch6 - 7 8 CHAPTER 6 REVIEW DEMAND 6.5 Price offer...

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Chapter 6 Review: Demand The consumer’s demand function can be written as x 1 = x 1 ( p 1 ,p 2 ,m ) 6.1 Normal and inferior goods For a normal good, the quantity demanded always changes in the same direction as income (e.g., if income increases, quantity demanded increases, and vice versa.) 4 x 1 4 m > 0 1
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2 CHAPTER 6. REVIEW: DEMAND For an inferior good, 4 x 1 4 m < 0
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6.1. NORMAL AND INFERIOR GOODS 3
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4 CHAPTER 6. REVIEW: DEMAND 6.2 Income offer curves and Engel curves
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6.3. EXAMPLE WITH COBB-DOUGLAS PREFERENCES 5 6.3 Example with Cobb-Douglas preferences
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6 CHAPTER 6. REVIEW: DEMAND 6.4 Ordinary goods and Giffen goods
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6.4. ORDINARY GOODS AND GIFFEN GOODS
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Unformatted text preview: 7 8 CHAPTER 6. REVIEW: DEMAND 6.5 Price offer curves and the demand curve 6.6 Substitute and complements If the demand for good 1 goes up when the price of good 2 goes up, then we say that good 1 is a substitute for good 2. In terms of rates of change, good 1 is a substitute for good 2 if 4 x 1 4 p 2 > On the other hand, if the demand of good 1 goes down when the price of good 2 goes up, we say good 1 is a complement to good 2. This means that 6.7. THE INVERSE DEMAND FUNCTION 9 4 x 1 4 p 2 < 6.7 The inverse demand function...
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This note was uploaded on 03/14/2010 for the course ECON microecono taught by Professor Yy during the Spring '10 term at Seoul National.

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review_ch6 - 7 8 CHAPTER 6 REVIEW DEMAND 6.5 Price offer...

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