lec6 - 2010-03-15 Applying Model of Consumer Behavior...

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2010-03-15 1 econ201 Consumer Behavior In case of Price change Applying Model of Consumer Behavior (chapter 3) Working with non-linear budget constraints Understanding how consumer demand is affected by a change in prices is affected by a change in Understanding how consumer demand is affected by a change in income Deriving a Demand Curve AOG U 1 e 1 50 U 0 e 0 Jane’s Budget Constraint and Preferences Income= $50, all prices = $1 (initially) Valentine’s Cards Price of Val. Cards Valentine’s Cards 10 0 40 Jane’s Demand Curve 1.00 20 0.50 40 50 20 Deriving a Demand Curve Based on Preferences AOG 50 U 0 e 0 U 1 e 1 Ken’s Budget Constraint and Preferences Valentine’s Cards Price of Val. Cards Valentine’s Cards 10 0 40 Jane’s Demand Curve 1.00 20 0.50 40 50 20 80 80 Ken’s Demand Curve Deriving a Demand Curve Different Sensitivity to Price Changes Price e 0 1.00 Ken’s demand curve is more elastic More responsive to change in price Valentine’s Cards 20 e 1 ' e 1 0.50 40 80 D- Jane D-Ken How Do Businesses Use Elasticity? Are my customers price sensitive?
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This note was uploaded on 09/18/2010 for the course ECON 201 taught by Professor Beomsookim during the Fall '10 term at Korea University.

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lec6 - 2010-03-15 Applying Model of Consumer Behavior...

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