Chapter 4 Review

Chapter 4 Review - Chapter 4: Consumer Equilibrium and...

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Chapter 4: Consumer Equilibrium and Market Demand LEARNING OBJECTIVES Explain the concept of consumer equilibrium. Demonstrate how changes in prices or income affect consumer equilibrium. Derive a consumer's demand curve. Know the difference between a change in demand and a change in quantity demanded. Demonstrate how a change in consumer disposable income, a change in the price of a related good, or a change in tastes and preferences affects consumer demand. Identify the various components of consumer tastes and preferences that affect the demand for goods and services produced in the food and fiber system. Derive a market demand curve. Define consumer surplus and explain its usefulness to economic policy makers. CHAPTER SUMMARY The major points made in the chapter can be summarized as follows: 1. Factors affecting consumer demand are: price of the product price of other products disposable income of consumers tastes and preferences 2. The consumer is at equilibrium when the marginal rate of substitution or slope of the highest attainable indifference curve is equal to the slope of the budget line, or alternatively when an
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Chapter 4 Review - Chapter 4: Consumer Equilibrium and...

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