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Notes 10.03.26

# Notes 10.03.26 - function from the marshallian An example...

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Second Midterm Review March 26, 2010

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Individual Demand Finding the consumer’s (Marshallian) demand function from the given utility function Cobb-Douglas, minimum, linear. We did examples of these in class Homogeneity of demand functions Engel Curve
Income and Substitution Effects Graphically and mathematically you should be able to find TE, IE, SE. Graphically Examples we did in class Mathematically By using Slutsky equation Before Slutsky equation, let us review compensated demand function

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Compensated Demand Function Relationship between the price of a good and the quantity demanded keeping the prices of other goods and utility (purchasing power) constant When there is price change marshallian demand function reflects both income and substitution effects although the compensated demand functions reflects only the substitution effect Marshallian and compensated demands are the same at current prices (their intersection point), but differ as price changes
Finding the compensated demand

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Unformatted text preview: function from the marshallian An example TE, IE, SE from Slutsky Equation (Example) Market Demand • Horizontal summation of individual demand functions – In class example • Elasticity of Demand • Price elasticity of demand • Elasticity and total revenue • Income elasticity of demand – Normal vs inferior • Cross price elasticity of demand – Substitutes and complements • Determinants of price elasticity of demand Production • Short run vs Long run • MPL, APL • The law of diminishing marginal returns – Short run concept • Isoquants – From different production functions • MRTS – Long run concept • Writing the production functions • Returns to scale Costs • Short run and Long run • Allocating the production between two processes – Marginal costs should be the same • TC, VC, FC • ATC, AVC, AFC, MC • The relation between MP and MC • The relation between AP and AVC • Isocost lines...
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Notes 10.03.26 - function from the marshallian An example...

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