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Chapter_5_appendix

# Chapter_5_appendix - Demand Demand Appendix: Appendix:...

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Demand Demand

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Appendix: Graphical Representation of  Appendix: Graphical Representation of  Consumer Choice Consumer Choice Budget Constraint Need to find out the different consumption  bundles that would use up the budget.
Appendix FIGURE 9A-3 Dave’s Budget Constraint The Budget Constraint

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Budget Constraint Budget Constraint Mathematical Representation:  e.g., P pizza =\$2, P coke =\$1, budget \$10 Budget constraint: 2X + 1Y = 10  More generally: P x X + P y Y = I P x : Price of X P y : Price of Y I: Income available to spend on the two goods.    What happens if the price of one good  changes?
Appendix FIGURE 9A-5 How a Price Decrease Affects the Budget Constraint How a Price Change Affects Optimal  Consumption

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Consumer Preference Consumer Preference Indifference curve   A curve that shows the  combinations of consumption bundles that give the  consumer the same utility.
2 2 A Indifference Curve Indifference Curve B 1 4 C 1 D 5 E coke Pizza Indifference Curve

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