Pop six packs per month the best affordable point 10

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Unformatted text preview: (per month) Pop (six-packs per month) Price Effect 10 Best affordable point: movies $6 8 c 6 5 4 Best affordable point: movies $3 j I2 2 I1 0 2 4 5 6 8 10 10 Movies (per month) Price (dollars per movie) Price Effect and Demand Curve Curve a 6 5 4 b 3 2 Lisa’s demand curve for movies 1 0 2 45 6 8 10 Movies (per month) Pop (six-packs per month) Income Effect 10 Income $30 8 6 4 3 2 0 j I2 Income $21 2 I1 4 6 8 10 10 Movies (per month) Price (dollars per movie) Income Effect and Income Change in Demand Change 6 5 4 b c 3 2 1 0 D1 D0 2 4 6 8 10 10 Movies (per month) Substitution Effect Substitution the effect of a change in price on the quantity bought when the consumer remains indifferent between the original and the new situation. Income Effect Income the change in consumption that results from a change in the consumer’s income, ceteris paribus. Positive for normal goods (reinforces substitution effect). Negative for inferior goods (offsets substitution effect to some degree). Pop (six-packs per month) Substitution Effect and Income Effect When the price of When movies falls from $6 to $3... $3... 10 8 7 c 6 5 5 4 Substitution 3 effect 2 j ... Lisa’s best affordable ... point changes from c Income to j. effect to k I2 I1 0 2 45 6 8 10 10 Movies (per month)...
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