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The Law of Demand and Components of Individual and Market Demand
- 5. Individual Consumer’s Demand Qd X = f(P X , I, P Y , T) quantity demanded of commodity X by an individual per time period price per unit of commodity X consumer’s income price of related (substitute or complementary) commodity tastes of the consumer Qd X = P X = I = P Y = T =
- 6. Qd X = f(P X , I, P Y , T) Qd X / P X < 0 Qd X / I > 0 if a good is normal Qd X / I < 0 if a good is inferior Qd X / P Y > 0 if X and Y are substitutes Qd X / P Y < 0 if X and Y are complements
- 10. Market Demand Function QD X = f(P X , N, I, P Y , T) quantity demanded of commodity X price per unit of commodity X number of consumers on the market consumer income price of related (substitute or complementary) commodity consumer tastes QD X = P X = N = I = P Y = T =
- 13. Linear Demand Function Q X = a 0 + a 1 P X + a 2 N + a 3 I + a 4 P Y + a 5 T P X Q X Intercept: a 0 + a 2 N + a 3 I + a 4 P Y + a 5 T Slope: Q X / P X = a 1
- 14. Linear Demand Function Example Part 1 Demand Function for Good X Q X = 160 - 10P X + 2N + 0.5I + 2P Y + T Demand Curve for Good X Given N = 58, I = 36, P Y = 12, T = 112 Q = 430 - 10P
- 15. Linear Demand Function Example Part 2 Inverse Demand Curve P = 43 – 0.1Q Total and Marginal Revenue Functions TR = 43Q – 0.1Q 2 MR = 43 – 0.2Q
- 19. Price Elasticity of Demand Linear Function Point Definition
- 20. Price Elasticity of Demand Arc Definition
- 21. Marginal Revenue and Price Elasticity of Demand
- 22. Marginal Revenue and Price Elasticity of Demand P X Q X MR X
- 23. Marginal Revenue, Total Revenue, and Price Elasticity TR Q X MR<0 MR>0 MR=0
- 26. Income Elasticity of Demand Linear Function Point Definition
- 27. Income Elasticity of Demand Arc Definition Normal Good Inferior Good
- 28. Cross-Price Elasticity of Demand Linear Function Point Definition
- 29. Cross-Price Elasticity of Demand Arc Definition Substitutes Complements
- 37. Indifference Curves: Complements and Substitutes Perfect Complements Perfect Substitutes Q Y Q X Q Y Q X
- 39. Budget Lines: Change in Price GF: M = $6, P X = P Y = $1 GF’: P X = $2 GF’’: P X = $0.67
- 41. Budget Lines: Change in Income GF: M = $6, P X = P Y = $1 GF’: M = $3, P X = P Y = $1