What Are We doing in this Chapter? We apply our basic framework of consumer choice to study issues of choices across different time periods, e Again in terms of theoretical framework, not much is new!
From Individual to Market Demand Functions Think of an economy containing n consumers, denoted by= 1, .. ,n. Consumer is' ordinary demand function for commodity j is
Where are We in the Course? We are working on the 1st of the 3 components of microeconomics: Consumer behavior, production theory, and market. There are three elements of consumer behavior: budget constraint, preference, and choices
What Do We Do in This Chapter? We conduct comparative statics analysis of ordinary demand functions the study of how ordinary demands*(p,,P2,y) and x2*(p1,p2,y) change as prices1,P2 and income y change. Theoretically, nothing new
What Are We Doing in this Chapter? We take a further look at the comparative statics of demand function with respect to prices; We divide the changes in demand due to price changes into two effects: -Substitution effect