ECON100A_9 - p2 Pick initial optimum A Draw new budget line...

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 1/4/2008 1 Decomposing price changes p 2 Pick initial optimum A Draw new budget line Draw parallel budget line Pick point B Draw indif curve through A and B (This gives sub effect) Figure out where to put C X 1 X 2 B A
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 1/4/2008 2 Question 1 p 2 Good 2 inferior Where is the optimum consumption bundle after the price change? 1. C 1 2. C 2 3. C 3 X 1 X 2 B A C 1 C 2 C 3
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 1/4/2008 3 Question 2 p 2 Goods 1 and 2 subs Good 1 normal Where is the optimum consumption bundle after the price change? 1. C 1 2. C 2 3. C 3 X 1 X 2 B A C 1 C 2 C 3
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 1/4/2008 4 Aggregation
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 1/4/2008 5 Individual vs. Market Demand 7 15 X 1 P 1 Fred
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 1/4/2008 6 Market Demand: Question 1 X 1 P 1 7 15 7 20 Fred George X 1 P 1 What is Market Demand when P 1 =7?
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 1/4/2008 7 Market Demand X 1 P 1 7 15 7 20 Fred George X 1 P 1 X 1 P 7 35 Market What is Market Demand when P 1 =7?
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 1/4/2008 8 Market for Factors of Production Market for Finished Goods & Services HOUSEHOLDS FIRMS DEMAND (for Goods & Services) $ $ $ $ SUPPLY (of Factors of Prod) CIRCULAR FLOW DIAGRAM
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 1/4/2008 9 SUPPLY OF FACTORS OF  PRODUCTION Labor
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 1/4/2008 10 Question 1 A doctor earns $150/hr. He wants to take off from work and go see a movie that will last 2 hours. The ticket costs $8. How many dollars worth of other consumption must he give up to see the movie?
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