demand.6a - Econ 100A Demand Part 1(Chapter 6 Thomas G Koch...

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Unformatted text preview: Econ 100A: Demand, Part 1 (Chapter 6) Thomas G. Koch Fall 2008 Thomas G. Koch Demand (6a) 1(37) Clickers • Turn on your clicker • Hit a button Thomas G. Koch Demand (6a) 2(37) A reminder First exam is one week away! Thomas G. Koch Demand (6a) 3(37) From last time • Developed an algorithm • Given preferences (utility function) • and a budget constraint • Find the demand function for some good. We found x * 1 = x 1 ( p 1 , p 2 , m ) x * 2 = x 2 ( p 1 , p 2 , m ) Thomas G. Koch Demand (6a) 4(37) C-D example • Used utility function to get MRS • Plugged into budget constraint • Out we get: x * 1 = m p 1 ( 1 + d c ) Thomas G. Koch Demand (6a) 5(37) Comparative Statics • Comparative= one vs. another • Statics= equilibrium choices • As ( p 1 , p 2 , m ) change . . . • how do x * 1 , x * 2 change? Thomas G. Koch Demand (6a) 6(37) First: Income • Some goods: as you get more money . . . • you buy more of them. • ∂ x 1 ( p 1 , p 2 , m ) ∂ m > Most goods are like this We call them “normal” goods Thomas G. Koch Demand (6a) 7(37) Two normal goods Thomas G. Koch Demand (6a) 8(37) Not all goods are normal • Inferior goods: ∂ x 1 ( p 1 , p 2 , m ) ∂ m < • As you have more money . . ....
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This note was uploaded on 09/12/2011 for the course ECON 100A/ 100B taught by Professor Staff during the Fall '08 term at UCSB.

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demand.6a - Econ 100A Demand Part 1(Chapter 6 Thomas G Koch...

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