Chapter4 - Part 1

Chapter4 - Part 1 - Individual and Market Demand Chapter 4...

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Individual and Market Demand Chapter 4
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Chapter Outline Individual Demand Income and Substitution Effects Market Demand Consumer Surplus
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Effect of Price Changes A reduction in the price of food, with income and the price of clothing fixed, causes this consumer to choose a different market basket. In (a) , the baskets that maximize utility for various prices of food (point A , $2; B , $1; D , $0.50) trace out the price-consumption curve. Part (b) gives the demand curve, which relates the price of food to the quantity demanded. (Points E, G, and H correspond to points A, B, and D, respectively). Individual Demand
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Effect of Income Changes An increase in income, with the prices of all goods fixed, causes consumers to alter their choice of market baskets. In part (a) , the baskets that maximize consumer satisfaction for various incomes (point A , $10; B , $20; D , $30) trace out the income-consumption curve. The shift to the right of the
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Chapter4 - Part 1 - Individual and Market Demand Chapter 4...

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