2010_lecture_8

2010_lecture_8 - Economics 101—Lecture 8 Consumer Surplus...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Economics 101—Lecture 8 Consumer Surplus and Revealed Preference George J. Mailath February 8, 2011 In our last episode 1 We studied the labor/leisure decision of a worker, as an illustration of substitution and income effects. In our last episode 1 We studied the labor/leisure decision of a worker, as an illustration of substitution and income effects. 2 Compensating variation of a change from p to p is ( u = V ( p , I ) ) given by CV ( p → p ) = e ( p , u ) − e ( p , u ) (suppose only the price of good 1 changes and p 1 > p 1 ) = p 1 p 1 ∂ e ( p , u ) ∂ p 1 dp 1 = p 1 p 1 x c 1 ( p , u ) dp 1 . In our last episode 1 We studied the labor/leisure decision of a worker, as an illustration of substitution and income effects. 2 Compensating variation of a change from p to p is ( u = V ( p , I ) ) given by CV ( p → p ) = e ( p , u ) − e ( p , u ) (suppose only the price of good 1 changes and p 1 > p 1 ) = p 1 p 1 ∂ e ( p , u ) ∂ p 1 dp 1 = p 1 p 1 x c 1 ( p , u ) dp 1 . 3 What if p 1 < p 1 ? Elasticities Consider a demand function x i ( p , I ) . How does expenditure p i x i ( p , I ) respond to a change in price p i ? Elasticities Consider a demand function x i ( p , I ) . How does expenditure p i x i ( p , I ) respond to a change in price p i ? ∂ p i x i ( p , I ) ∂ p i = x i + p i ∂ x i ∂ p i Elasticities Consider a demand function x i ( p , I ) . How does expenditure p i x i ( p , I ) respond to a change in price p i ? ∂ p i x i ( p , I ) ∂ p i = x i + p i ∂ x i ∂ p i = x i 1 + p i x i ∂ x i ∂ p i Elasticities Consider a demand function x i ( p , I ) . How does expenditure....
View Full Document

{[ snackBarMessage ]}

Page1 / 28

2010_lecture_8 - Economics 101—Lecture 8 Consumer Surplus...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online