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Ch6 - Chapter Six Demand Properties of Demand Functions x...

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Chapter Six Demand

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Properties of Demand Functions Comparative statics analysis of ordinary demand functions -- the study of how ordinary demands x 1 *(p 1 ,p 2 ,y) and x 2 *(p 1 ,p 2 ,y) change as prices p 1 , p 2 and income y change.
Own-Price Changes How does x 1 *(p 1 ,p 2 ,y) change as p 1 changes, holding p 2 and y constant? Suppose only p 1 increases, from p 1 to p 1 ’’ and then to p 1 ’’’.

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x 1 x 2 p = p ’ Fixed p 2 and y. p 1 x 1 + p 2 x 2 = y Own-Price Changes
Own-Price Changes x 1 x 2 p 1 = p 1 ’’ p = p ’ Fixed p 2 and y. p 1 x 1 + p 2 x 2 = y

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Own-Price Changes x 1 x 2 p 1 = p 1 ’’ p 1 = p 1 ’’’ Fixed p 2 and y. p 1 = p 1 p 1 x 1 + p 2 x 2 = y
x 2 x 1 p 1 = p 1 Own-Price Changes Fixed p 2 and y.

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x 2 x 1 x 1 *(p 1 ’) Own-Price Changes p 1 = p 1 Fixed p 2 and y.
x 2 x 1 x 1 *(p 1 ’) p 1 x 1 *(p 1 ’) p 1 x 1 * Own-Price Changes Fixed p 2 and y. p 1 = p 1

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x 2 x 1 x 1 *(p 1 ’) p 1 x 1 *(p 1 ’) p 1 p 1 = p 1 ’’ x 1 * Own-Price Changes Fixed p 2 and y.
x 2 x 1 x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 x 1 *(p 1 ’) p 1 p 1 = p 1 ’’ x 1 * Own-Price Changes Fixed p 2 and y.

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x 2 x 1 x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 p 1 ’’ x 1 * Own-Price Changes Fixed p 2 and y.
x 2 x 1 x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 p 1 ’’ p 1 = p 1 ’’’ x 1 * Own-Price Changes Fixed p 2 and y.

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x 2 x 1 x 1 *(p 1 ’’’) x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 p 1 ’’ p 1 = p 1 ’’’ x 1 * Own-Price Changes Fixed p 2 and y.
x 2 x 1 x 1 *(p 1 ’’’) x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 x 1 *(p 1 ’) x 1 *(p 1 ’’’) x 1 *(p 1 ’’) p 1 p 1 ’’ p 1 ’’’ x 1 * Own-Price Changes Fixed p 2 and y.

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x 2 x 1 x 1 *(p 1 ’’’) x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 x 1 *(p 1 ’) x 1 *(p 1 ’’’) x 1 *(p 1 ’’) p 1 p 1 ’’ p 1 ’’’ x 1 * Own-Price Changes Ordinary demand curve for commodity 1 Fixed p 2 and y.
x 2 x 1 x 1 *(p 1 ’’’) x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 x 1 *(p 1 ’) x 1 *(p 1 ’’’) x 1 *(p 1 ’’) p 1 p 1 ’’ p 1 ’’’ x 1 * Own-Price Changes Ordinary demand curve for commodity 1 Fixed p 2 and y.

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x 2 x 1 x 1 *(p 1 ’’’) x 1 *(p 1 ’) x 1 *(p 1 ’’) p 1 x 1 *(p 1 ’) x 1 *(p 1 ’’’) x 1 *(p 1 ’’) p 1 p 1 ’’ p 1 ’’’ x 1 * Own-Price Changes Ordinary demand curve for commodity 1 p price offer curve Fixed p 2 and y.
Own-Price Changes The curve containing all the utility- maximizing bundles traced out as p 1 changes, with p 2 and y constant, is the p - price offer curve .

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Own-Price Changes What does a p 1 price-offer curve look like for Cobb-Douglas preferences?
What does a p 1 price-offer curve look like for Cobb-Douglas preferences? Take

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Ch6 - Chapter Six Demand Properties of Demand Functions x...

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