micro-04_demand2_ - 8/27/11 & 6¸ª * (2011-1) Shifts...

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Unformatted text preview: 8/27/11 & 6¸ª * (2011-1) Shifts in an Individual Demand Curve • What happens to the demand curve if something other than price changes? – What about a change in income? – What about a change in the price of another good? – What about a change in preferences? & 6¸ ª * (2011-1) 22 8/27/11 h É a¸ª * (2011-1) Shifts in an Individual Demand Curve Px Px X X P1 P1 X 1 X 1 An increase in income Normal Inferior X 2 d 1 d 2 d 1 X 2 d 2 h Éa ¸ª * (2011-1) 33 8/27/11 ¤ ß Z¸ª * (2011-1) Shifts in an Individual Demand Curve Px Px X X P1 P1 X 1 X 1 An increase in the price of Y Substitutes Complements X 2 d 1 d 2 d 1 X 2 d 2 ¤ ßZ¸ª * (2011-1) 44 8/27/11 8 k 2¸ª * (2011-1) Shifts in an Individual Demand Curve Px Px X X P1 P1 X 1 X 1 Changes in Preferences Hotter Weather More Tree Huggers X 2 d 1 d 2 d 1 X 2 d 2 8 k2 ¸ª * (2011-1) 55 8/27/11 L È a¸ª * (2011-1) A Comment on Terminology • Do not confuse the terms demand and quant- ity demanded . • Price causes a change in quantity demanded . It does NOT change demand . • A change in factors other than price change demand . L Èa¸ª* (2011-1) 66 8/27/11 x n 2¸ª * (2011-1) Some Numerical Examples • Perfect Complements – Person consumes 2 bags of popcorn for each movie: C=2M – Budget constraint: PCC + PMM = I – PC(2M) + PMM = I – M = I/ (2PC + PM) – w/ I = $30 and PC = $2.50 – M = 30/(5 + PM) – Note as PM rises (falls), M falls (rises) x n2 ¸ª * (2011-1) 77 8/27/11 & AE a¸ª * (2011-1) Some Numerical Examples • Substitutability – Person spends ½ their income on burgers and ½ on soda. – Budget constraint: PBB + PSS = I – PBB = PSS = ½ I – B = ½ I / PB or S = ½ I / PS – w/ I = $30 – B = 15 / PB or S = 15 / PS – Note again as PB or PS rises (falls), B and S falls & AEa ¸ª * (2011-1) 88 8/27/11 ¤ ß Z¸ª * (2011-1) Consumer Surplus • Suppose you go to a concert. The price of a T- shirt is $25. You are willing to pay $40. What can you say? • Consumer surplus is the extra value consumers receive from consuming a good over what they pay for it. • Consumer surplus is what people would be will- ¤ ß Z¸ ª* (2011-1) 99 8/27/11 ‚ È a¸ª * (2011-1) Consumer Surplus & Demand Curve • The demand curve shows a person’s demand for T-Shirts....
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This note was uploaded on 08/27/2011 for the course ECON 101 taught by Professor Hal during the Spring '11 term at Ewha Womans University.

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micro-04_demand2_ - 8/27/11 & 6¸ª * (2011-1) Shifts...

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