Individual demand curve - effect of price change, Microeconomics

Individual Demand

* The Individual Demand Curve 

- Two significant Properties of Demand Curves

- 1) The level of utility which can be attained changes while moving along the curve.

- 2) At every instant on demand curve, the consumer is maximizing utility by fulfilling the condition that the MRS of food for clothing equals the ratio of prices of food and clothing.

Effect of Price Change
1120_individual demand.png

Individual Demand

* Income Changes

- Using figures developed earlier, the impact of a change in income can be illustrated by using indifference curves.
1178_individual demand1.png
Effects of Income Changes

634_individual demand2.png
- The income-consumption curve traces out utility maximizing combinations of food and clothing linked with every income level.

- An increase in income shifts budget line to right, increasing consumption along income-consumption curve.

- At the same time, increase in income shifts demand curve to right.

* Normal Good vs. Inferior Good

-  Income Changes

  • When income and consumption curve is having positive slope:

-The quantity demanded increases with the increase income.

-The income elasticity of demand is positive in nature.

-The product is a normal good.

  • When income consumption curve is having negative slope:

    -The quantity demanded decreases with the increase in income.

-The income elasticity of demand is negative in nature. 

-This good is an inferior good.

An Inferior Good

2160_individual demand3.png

Posted Date: 10/10/2012 7:10:40 AM | Location : United States







Related Discussions:- Individual demand curve - effect of price change, Assignment Help, Ask Question on Individual demand curve - effect of price change, Get Answer, Expert's Help, Individual demand curve - effect of price change Discussions

Write discussion on Individual demand curve - effect of price change
Your posts are moderated
Related Questions
Suppose scientists discover that eating soybeans prevents cancer and heart disease

Technical Economies: They are economies that accrue from the use of large machines with emphasis on full utilization and efficiency in production. First, there are some equip

Question : (a) Suppose Firm A is a perfectly competitive firm producing good X and faces the following average revenue and average cost Average Revenue: P = 10 Average Co

criticism of cournot model

Are there any economic effects to non-Hispanic whites, given that they no longer represent the majority of the population? Why are these examples important from an economic standpo

Capital Gain: A capital gain is a form of profit which is earned on an investment by re-selling an asset for more than it cost to buy. Assets that can be purchased for this purpose

Chemical properties of p block elements


Employment The calculations of human input in the production procedure. In the United States, there are two major measures of employment, as determined by the Bureau of Labor

Q. Can you explain Cost benefit analysis? A term used to explain analysis, which seeks to quantify in money terms as many of the costs and benefits of a policy or project as po