Demand analysis - PGP I Term I G 1 G 2 100 50 Budget line:...

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Unformatted text preview: PGP I Term I G 1 G 2 100 50 Budget line: 100G 1 +50G 2 =5000 Budget line: 50G 1 +50G 2 =5000 100 25 Budget line: 200G 1 +50G 2 =5000 q 2 q 1 q 1 p 1 d 1 200 100 50 20 45 80 q 1 =q 1 (p, I) PCC Depicts the relationship between price and quantity demanded at that price We achieve higher level of utility as we move along demand curve MRS=Price ratio falls as we move along the demand curve. Change in demand-shift in demand schedule Change in quantity demanded-Movement along demand curve bp a q Shift parameter (e.g. Income) Slope parameter (price) Income Price of related goods Tastes Expectations G 1 G 2 100 50 60 120 Budget line:100G 1 +50G 2 =5000 Budget line: 100G 1 +50G 2 =6000 Budget line: 100G 1 +50G 2 =7000 140 70 q 1 q 1 q 2 p 1 d 3 d 2 d 1 ICC 100 ICC is positively sloped-Normal goods ICC is negatively sloped-Inferior goods PCC is negatively sloped-Giffen goods q 1 p 1 d 3 d 1 d 2 Substitute: Increase in p 2 increases q 1 Complements: Increase in p 2 decreases q 1 q 1 p 1 s 1 p 1 p 2 q 1 q 2...
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This note was uploaded on 03/01/2012 for the course STRATEGY Om121 taught by Professor Abhinavdhar during the Spring '12 term at Harvard.

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Demand analysis - PGP I Term I G 1 G 2 100 50 Budget line:...

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