Download presentation

Presentation is loading. Please wait.

Published byAmber Hall Modified over 7 years ago

1
Chapter Six Demand

2
Properties of Demand Functions u Comparative statics analysis of ordinary demand functions -- the study of how ordinary demands x 1 *(p 1,p 2,y) and x 2 *(p 1,p 2,y) change as prices p 1, p 2 and income y change.

3
Own-Price Changes u How does x 1 *(p 1,p 2,y) change as p 1 changes, holding p 2 and y constant? u Suppose only p 1 increases, from p 1 to p 1 and then to p 1.

4
x1x1 x2x2 p 1 = p 1 Fixed p 2 and y. p 1 x 1 + p 2 x 2 = y Own-Price Changes

5
x1x1 x2x2 p 1 = p 1 Fixed p 2 and y. p 1 x 1 + p 2 x 2 = y

6
Own-Price Changes x1x1 x2x2 p 1 = p 1 Fixed p 2 and y. p 1 = p 1 p 1 x 1 + p 2 x 2 = y

7
p 1 = p 1 Own-Price Changes Fixed p 2 and y.

8
x 1 *(p 1 ) Own-Price Changes p 1 = p 1 Fixed p 2 and y.

9
x 1 *(p 1 ) p1p1 p 1 x1*x1* Own-Price Changes Fixed p 2 and y. p 1 = p 1

10
x 1 *(p 1 ) p1p1 p 1 p 1 = p 1 x1*x1* Own-Price Changes Fixed p 2 and y.

11
x 1 *(p 1 ) p1p1 p 1 p 1 = p 1 x1*x1* Own-Price Changes Fixed p 2 and y.

12
x 1 *(p 1 ) p1p1 p 1 x1*x1* Own-Price Changes Fixed p 2 and y.

13
x 1 *(p 1 ) p1p1 p 1 p 1 = p 1 x1*x1* Own-Price Changes Fixed p 2 and y.

14
x 1 *(p 1 ) p1p1 p 1 p 1 = p 1 x1*x1* Own-Price Changes Fixed p 2 and y.

15
x 1 *(p 1 ) p1p1 p 1 x1*x1* Own-Price Changes Fixed p 2 and y.

16
x 1 *(p 1 ) p1p1 p 1 x1*x1* Own-Price Changes Ordinary demand curve for commodity 1 Fixed p 2 and y.

17
x 1 *(p 1 ) p1p1 p 1 x1*x1* Own-Price Changes Ordinary demand curve for commodity 1 Fixed p 2 and y.

18
x 1 *(p 1 ) p1p1 p 1 x1*x1* Own-Price Changes Ordinary demand curve for commodity 1 p 1 price offer curve Fixed p 2 and y.

19
Own-Price Changes u The curve containing all the utility- maximizing bundles traced out as p 1 changes, with p 2 and y constant, is the p 1 - price offer curve. u The plot of the x 1 -coordinate of the p 1 - price offer curve against p 1 is the ordinary demand curve for commodity 1.

20
Income Changes u How does the value of x 1 *(p 1,p 2,y) change as y changes, holding both p 1 and p 2 constant?

21
Income Changes Fixed p 1 and p 2. y < y < y

22
Income Changes Fixed p 1 and p 2. y < y < y

23
Income Changes Fixed p 1 and p 2. y < y < y x 1 x 2

24
Income Changes Fixed p 1 and p 2. y < y < y x 1 x 2 Income offer curve

25
Income Changes u A plot of quantity demanded against income is called an Engel curve.

26
Income Changes Fixed p 1 and p 2. y < y < y x 1 x 2 Income offer curve

27
Income Changes Fixed p 1 and p 2. y < y < y x 1 x 2 Income offer curve x1*x1* y x 1 y y y

28
Income Changes Fixed p 1 and p 2. y < y < y x 1 x 2 Income offer curve x1*x1* y x 1 y y y Engel curve; good 1

29
Income Changes Fixed p 1 and p 2. y < y < y x 1 x 2 Income offer curve x2*x2* y x 2 y y y

30
Income Changes Fixed p 1 and p 2. y < y < y x 1 x 2 Income offer curve x2*x2* y x 2 y y y Engel curve; good 2

31
Income Changes Fixed p 1 and p 2. y < y < y x 1 x 2 Income offer curve x1*x1* x2*x2* y y x 1 x 2 y y y y y y Engel curve; good 2 Engel curve; good 1

32
Income Effects u A good for which quantity demanded rises with income is called normal. u Therefore a normal goods Engel curve is positively sloped.

33
Income Effects u A good for which quantity demanded falls as income increases is called income inferior. u Therefore an income inferior goods Engel curve is negatively sloped.

Similar presentations

© 2021 SlidePlayer.com Inc.

All rights reserved.

To make this website work, we log user data and share it with processors. To use this website, you must agree to our Privacy Policy, including cookie policy.

Ads by Google