Econ1-Fall2010-05A-Demand-handout

Econ1-Fall2010-05A-Demand-handout - Readings Economics1...

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Economics 1 rinciples of Microeconomics Principles of Microeconomics 5. Demand (A) Fall 2010 Herb Newhouse 1 eadings Readings hapter 5 Appendix (p W 1) Chapter 5 Appendix (p W 1 W 11) The Budget Constraint onsumer Preferences Consumer Preferences 2 utline Outline he budget constraint The budget constraint. Graph of the budget constraint. hanges in income or a price Changes in income or a price. More complicated budget constraints. Preferences. Indifference curves. deec e cu es The slope of indifference curves/Marginal rate of substitution. 3 ey Elements of Consumer Behavior Key Elements of Consumer Behavior hat factors influence how much of a good or What factors influence how much of a good or service people buy? Price Income
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he Budget Constraint The Budget Constraint A budget constraint shows the limits of a household’s g consumption. xample: suppose you have $10/week to spend on junk food. Example: suppose you have $10/week to spend on junk food. Price of hamburgers = $2. Price of candy bars = $1. What are all the possible combinations of candy bars and hamburgers that you can buy? Is 1 hamburger and 1 candy bar affordable?
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Econ1-Fall2010-05A-Demand-handout - Readings Economics1...

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