Micro notes for Final Exams

# Micro notes for Final Exams - Chapter 6 DEMAND The demand...

This preview shows pages 1–2. Sign up to view the full content.

Chapter 6 – DEMAND The demand function: x1=x1(p1,p1,m) x2= x2(p1,p2,m) The left hand side stand for the quantity demanded. The right hand side of each equation is the function that related the prices and income to that quantity. Comparative statics: comparing 2 situations, before and after a change in the economic environment, static, not concerned with any adjustment process that may involve in moving from one choice to another; rather we will only examine equilibrium choice. Optimal choice is only affected by: prices and income How does demand change when prices and income change?? Normal good: demand for a good increases and income increases Inferior good: increase in income results in a reduction of the consumption of that good. Luxury good: if the demand goes up by a greater proportion than income. Necessary good: if the demand for a good goes up by a lesser proportion than income. Giffen good: demand for it decreases when the price decreases.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 3

Micro notes for Final Exams - Chapter 6 DEMAND The demand...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online