4_IndividualDemand_CS

4_IndividualDemand_CS - INDIVIDUAL DEMAND & COMPARATIVE...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
INDIVIDUAL DEMAND & COMPARATIVE STATICS Pindyck & Rubinfeld 4.1, 4.2
Background image of page 1

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

View Full DocumentRight Arrow Icon
The Price Consumption Curve Initial choice = A. P C constant, I constant; P F ecreases decreases Budget line will rotate out. New choice = B Higher level of satisfaction. Each time P F falls there is a new basket chosen. The curve connecting all baskets chosen = price consumption curve .
Background image of page 2
PCC Individual Demand curve e rve connecting all baskets The curve connecting all baskets chosen = price consumption curve. Trace the PCC down to (F, P F ) space nd and… You get the demand curve!
Background image of page 3

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

View Full DocumentRight Arrow Icon
The Income Consumption Curve Initial choice: A Let prices stay fixed, I increases. Budget line shifts out (parallel). New bundle B, higher satisfaction. As I increases, new bundles at higher levels of satisfaction. Connect the bundles to get the income-consumption curve .
Background image of page 4
ICC Shifts in the demand curve Initial choice: A Let prices stay fixed, I increases. Budget line shifts out (parallel). New bundle B, higher satisfaction. As I increases, new bundles at higher levels of satisfaction. Connect the bundles to get the income-consumption curve . ace own to the (F, P space to get Trace down to the (F, P F ) space to get shifts in the demand curve.
Background image of page 5

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

View Full DocumentRight Arrow Icon
Goods can be normal or inferior
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/30/2011 for the course ECO 112 taught by Professor Man during the Spring '11 term at HKU.

Page1 / 18

4_IndividualDemand_CS - INDIVIDUAL DEMAND & COMPARATIVE...

This preview shows document pages 1 - 7. Sign up to view the full document.

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