demand.6a

demand.6a - Econ 100A: Demand, Part 1 (Chapter 6) Thomas G....

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Unformatted text preview: Econ 100A: Demand, Part 1 (Chapter 6) Thomas G. Koch Winter 2009 Thomas G. Koch Demand (6a) 1(38) Clickers Turn on your clicker Hit a button Thomas G. Koch Demand (6a) 2(38) A reminder First exam is one week away! Thomas G. Koch Demand (6a) 3(38) 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(38) 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(38) 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(38) 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(38) Two normal goods Thomas G. Koch Demand (6a) 8(38) Not all goods are normal Inferior goods: x 1 ( p 1 , p 2 , m ) m < As you have more money . . ....
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demand.6a - Econ 100A: Demand, Part 1 (Chapter 6) Thomas G....

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