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
Q=10-2P,PRICE DECREASE FROM RS 3 TO 2

Given the cost function as C=0.3Q3 -2Q2 + 13Q + 25, find the supply function.uestion..

Strategic Importance of Supply Chain Management This describes the scope of supply chain management (SCM), including the management of procurement, logistics and materials. It

Non-Tradable:Some products can't be transported over long distances or otherwise sold to consumers from far-off locations. These products (including some goods as well as most serv

PARALLEL ECONOMY: What is in popular parlance known as black money, and is, misleadingly called the 'parallel' economy, (as it operates very much with and within the legal, fo


Write the formulas to show the reactants and products for the following reactions. Assume that solutions are aqueous unless otherwise indicated. Represent substances in solutions a

Exchange Rate Policy: After the second amendment to the Articles of Agreement of IMF which came into effect on April 1, 1978, every member is free to choose its own exchange r

Use a graphical illustration to describe briefly what the influence of each of the following would be on the market supply of labor:(a) an increase in immigration (b) more women en

The Production Possibilities Frontier (PPF) The PPF curve exhibits the probable combinations of goods and services accessible to an economy, given that all productive resources