class 5 Demand post

class 5 Demand post - Class 5 Demand What we did last time...

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Class 5 Demand
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What we did last time ptimal Choice ± Optimal Choice ± Budget Set raphical Solution ± Graphical Solution ± The Mathematics of Optimal Choice ± Intuition: Walking up the Hill ± The Math ± Finding the Optimal Choice
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Optimal Choice: Graphical Solution q Cost of Bundle: X(q 1 ,q 2 ) = p 1 q 1 +p 2 q 2 2 Budget Constraint: The Function q 2 (q 1 ) which is implicitly defined by X(q 1 ,q 2 (q 1 )) = Y Mathematical Problem: at e at ca ob e q 2 12 , (, ) qq MaxU q q 11 2 2 .. stpq pq Y += Marginal Rate of Transformation (MRT): MRT (p 1 , p 2 )= - p 1 / p 2 Marginal Rate of Substitution (MRS): MRS (p 1 , p 2 )= - U 1 / U 2
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Our Game
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Our Game
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Our Game
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Outline emand Function: Changing Prices ± Demand Function: Changing Prices ± Engel Curve: Changing Income ± Hicks Demand Curve: Changing Relative Prices ± Decomposition: ± The “Substitution Effect” he “Income Effect” ± The Income Effect ± Putting it all together
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Demand: How to Derive a Demand Function q 2 q 1 p 1 q 1
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Demand: How to Derive a Demand Function q Example 2 p 2 =2 and Y=2 U (q 1 ,q 2 )= q 1* q 2 q 1 p 1 q 1
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This note was uploaded on 12/10/2011 for the course ECON 401 taught by Professor Burbidge,john during the Winter '08 term at Waterloo.

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class 5 Demand post - Class 5 Demand What we did last time...

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