University:
University of Houston
Course:
FINA 4330 | Corporate Finance
Academic year:

2023
Views:

351

Pages:

10
Author:

Kash Keith

Chapter 4 Individual and Market Demand Topics to be Discussed  Individual Demand  Income and Substitution Effects  Market Demand  Consumer Surplus Topics to be Discussed  Network Externalities  Empirical Estimation of Demand Individual Demand  Price Changes • Using the figures developed in the previous chapter, the impact of a change in the price of food can be illustrated using indifference curves. Individual Demand  The Demand Curve • The price-consumption curve traces the utilitymaximizing combinations of food and clothing associated with each and every price of food. • The demand curve relates the quantity of food that the consumer will buy to the price of food. Effect of a Price Change Clothing (units per month) Food (units per month) Effect of a Price Change Clothing (units per month) The budget lines illustrate three prices for food--$2 $2 Food (units per month) Effect of a Price Change Clothing (units per month) The budget lines illustrate three prices for food--$2, $1, $2 $1 Food (units per month) Effect of a Price Change Clothing (units per month) The budget lines illustrate three prices for food--$2, $1, and $.50 $2 $1 $0.50 Food (units per month) Effect of a Price Change Clothing (units per month) Three separate indifference curves are tangent to each budget line. A U1 D B U3 U2 Food (units per month)

Individual and Market Demand 1

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