{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Econ 10101 13th - As your income increases you inevitably...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ 10101 13 th MUa/Pa > MUb/Pb :- you will always buy more b – bananas Reverse for the other way around You would keep following the trend till the LHS and RHS are equal. You must spend your entire income – in a market with only two goods – and no other utility for the money you have: then you would maximize what you are going to buy within your budget constraint MUa = 10 – Qa, and MUb = 20 – 2Qb If the price of A is half that of B If you solve: then you get Qa=Qb Changes in Income: Normal Goods As your income goes up, the quantity you buy goes up Inferior Goods As your income goes up, the quantity you buy goes down Indifference Curves don’t cross: as long as indifference curves lie on or within the budget line. They never curve such that X axis and yaxis rise simultaneously
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: As your income increases you inevitably spend more on certain goods:- luxury items, clothing, Very well defined in the spectrum of Broad Markets Are there inferior goods? In Narrow markets yes, but not in broad markets… Debate about Addictive substances, how does your buying pattern change toward addictive substances as your income goes up? Changes in Prices Substitutes As the Price of A goes up, the quantity of B goes up instead ( apples and pears) Complements As the Price of A goes up, the quantity of B goes down Giffen Goods As the Price of A goes up, the quantity of A goes up--- (not going to stress a lot) Deriving a demand curve...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern