Lectures 5 and 6 - Feb 1 _ 3

Lectures 5 and 6 - Feb 1 _ 3 - Econ 100A Microeconomics...

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Econ 100A – Microeconomics Professor Sarah Reynolds Department of Economics University of California, Berkeley Textbook by Thomas Nechyba Income and Substitution Effects in Consumer Goods Markets Chapter 7 - February 1st, 2011 In Chapter 6 we found an optimal bundle for a set income and prices. In this chapter we explore what happens to the optimal bundle when we change income and prices. ___________ Effect – a shift in the _____________________________ resulting from an (exogenous) shift in income. Graphically Mathematically
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Normal Good Inferior Good Definition Examples Mathematically Luxury Necessity Definition Examples Mathematically
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____________ Effect – a shift in the optimal bundle resulting from a change in __________________ and keeping ________________ constant. Example 1: The price of peas falls relative to the price of carrots. Indicate a new consumption bundle that would keep me just as happy as my original bundle. Example 2:
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This note was uploaded on 09/11/2011 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at Berkeley.

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Lectures 5 and 6 - Feb 1 _ 3 - Econ 100A Microeconomics...

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