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

Determinants of Social Demand for Education Certain levels of education like the secondary school and graduate level are considered as having productive value and are attribut

what are the properties of indifference curve

Consider a thin transparent plate whose thickness d(x,y) is a square (instead of a sinusoidal) periodic function of x of period Δ=λ. Show that the angle θ between the diffracted wa

Q. Level of aggregate demand in economy? Demand-pull inflation takes place when there is an increase in level of aggregate demand in economy. Aggregate demand comprises five co

Question 1: Using relevant examples to illustrate your arguments analyze the different economic impacts of tourism and discuss the different ways in which government can maximi


Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Explain crowding out and why it may be considered important for policy makers. Crowding out refers to how enhanced government borrowing (real borrowing!) might serve to raise i