Chapter 5 Applying Consumer Theory. © 2004 Pearson Addison-Wesley. All rights reserved5-2 Figure 5.1 Deriving an Individual’s Demand Curve.

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Chapter 5 Applying Consumer Theory. © 2004 Pearson Addison-Wesley. All rights reserved5-2 Figure 5.1 Deriving an Individuals Demand Curve.
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Chapter 5 Applying Consumer Theory

© 2004 Pearson Addison-Wesley. All rights reserved5-2 Figure 5.1 Deriving an Individual’s Demand Curve

© 2004 Pearson Addison-Wesley. All rights reserved Figure 5.2 Effect of a Budget Increase on an Individual’s Demand Curve

Page 112 Solved Problem 5.1

© 2004 Pearson Addison-Wesley. All rights reserved5-5 Figure 5.3 Income-Consumption Curves and Income Elasticities

© 2004 Pearson Addison-Wesley. All rights reserved Figure 5.4 A Good that is Both Inferior and Normal

© 2004 Pearson Addison-Wesley. All rights reserved5-7 Application (Page 117) Income Elasticities of Demand for Cars

© 2004 Pearson Addison-Wesley. All rights reserved5-8 Figure 5.5 Substitution and Income Effects with Normal Goods

© 2004 Pearson Addison-Wesley. All rights reserved5-9 Figure 5.6 Giffen Good

© 2004 Pearson Addison-Wesley. All rights reserved5-10 Q/UT AOG&S 0 X M I A B Inferior Good -- Not Giffen

© 2004 Pearson Addison-Wesley. All rights reserved5-11 Q/UT AOG&S 0 X M I A B

© 2004 Pearson Addison-Wesley. All rights reserved5-12 Q/UT AOG&S 0 X M I A BC

© 2004 Pearson Addison-Wesley. All rights reserved5-13 Q/UT AOG&S 0 X M I A BC D E X’ N

© 2004 Pearson Addison-Wesley. All rights reserved5-14 Q/UT AOG&S 0 X M I A BC D E X’ Substitution Effect N

© 2004 Pearson Addison-Wesley. All rights reserved5-15 Q/UT AOG&S 0 X M I A BC D E X’X” Substitution Effect N P I’

© 2004 Pearson Addison-Wesley. All rights reserved5-16 Q/UT AOG&S 0 X M I A BC D E X’X” Substitution Effect N P Income Effect I’

© 2004 Pearson Addison-Wesley. All rights reserved5-17 Q/UT AOG&S 0 X M I A BC D E X’X” Substitution Effect N P Income Effect Total Effect I’

© 2004 Pearson Addison-Wesley. All rights reserved5-18 Figure 5.7 The Consumer Price Index

© 2004 Pearson Addison-Wesley. All rights reserved5-19 Table 5.1 Cost-of-Living Adjustments

© 2004 Pearson Addison-Wesley. All rights reserved Figure 5.8 Demand for Leisure

© 2004 Pearson Addison-Wesley. All rights reserved5-21 Figure 5.9 Supply Curve of Labor

© 2004 Pearson Addison-Wesley. All rights reserved5-22 Figure 5.10 Income and Substitution Effects of a Wage Change

© 2004 Pearson Addison-Wesley. All rights reserved5-23 Page 135 Solved Problem 5.3

© 2004 Pearson Addison-Wesley. All rights reserved5-24 Page 135 Solved Problem 5.3

© 2004 Pearson Addison-Wesley. All rights reserved5-25 Application (Page 136) Leisure- Income Choices of Textile Workers

© 2004 Pearson Addison-Wesley. All rights reserved5-26 Figure 5.11a Labor Supply Curve that Slopes Upward and then Bends Backward

© 2004 Pearson Addison-Wesley. All rights reserved5-27 Figure 5.11b Labor Supply Curve that Slopes Upward and then Bends Backward

© 2004 Pearson Addison-Wesley. All rights reserved5-28 Figure 5.12 Relationship of Tax Revenue to Tax Rates

Cross-Chapter Analysis (Page 146) Child-Care Subsidies

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