Tài liệu Describing Consumer Preferences Using Indifference Curves pptx
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© 2003 McGraw-Hill Ryerson Limited
Describing
Describing
Consumer
Consumer
Preferences Using
Preferences Using
Indierence Curves
Indierence Curves
Chapter 8 Appendix
Chapter 8 Appendix
© 2003 McGraw-Hill Ryerson Limited.
Income expansion path
Income expansion path
◆
Income expansion path -IEP- traces all
the best (utility-maximizing) choices a
consumer makes as income changes.
●
●
© 2003 McGraw-Hill Ryerson Limited.
Income expansion path,
Income expansion path,
Fig. A8-1 a and b, p 195
Fig. A8-1 a and b, p 195
!
© 2003 McGraw-Hill Ryerson Limited.
"
Engel Curves
Engel Curves
◆
An Engel curve plots all the best
choices a consumer makes against
INCOME.
●
#$%##&#
◆
If an Engel curve is upward sloping, a
good is normal; downward sloping
indicates an inferior good.
© 2003 McGraw-Hill Ryerson Limited.
'
Engel Curves,
Engel Curves,
Fig. A8-2, p 195
Fig. A8-2, p 195
(##&
$
$#$
)*&
$#$
)$#&
© 2003 McGraw-Hill Ryerson Limited.
+
Price Expansion Path
Price Expansion Path
◆
Price expansion path – PEP – traces all
the best choices of a consumer as the
relative price changes.
© 2003 McGraw-Hill Ryerson Limited.
,
Price Expansion Path,
Price Expansion Path,
Fig. A8-3, p 195
Fig. A8-3, p 195
)*
&
)*
© 2003 McGraw-Hill Ryerson Limited.
Income and
Income and
substitution eects
substitution eects
◆
The law of demand states that there is
an inverse relationship between price
and quantity demanded. Two effects
occur:
●
$/$#
●
01###/$#
© 2003 McGraw-Hill Ryerson Limited.
2
Income and
Income and
substitution eects
substitution eects
◆
Income effect reflects the purchasing
power change as a result of the change in
price.
●
3#$$$/#
1&4$$
●
3#$$$/#
1&4$$5
© 2003 McGraw-Hill Ryerson Limited.
6
Income and
Income and
substitution eects
substitution eects
◆
Substitution effect reflects our
willingness to switch consumption away
from goods that become relatively more
expensive.
●
#7$81&
#9
●
###81&#
#7&*7$#5
© 2003 McGraw-Hill Ryerson Limited.
Income and
Income and
substitution eects
substitution eects
◆
For normal goods, income and
substitution effects work in the same
direction
◆
For inferior goods, income and
substitution effects work in the opposite
direction.
© 2003 McGraw-Hill Ryerson Limited.
Income and
Income and
substitution eects,
substitution eects,
Fig. 8-
Fig. 8-
4a, p 196
4a, p 196
:
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)
*
)
*
!
01###
/$#
$
/$#
© 2003 McGraw-Hill Ryerson Limited.
Income and
Income and
substitution eects,
substitution eects,
Fig. 8-
Fig. 8-
4b, p 196
4b, p 196
:
)
*
&
)
*
1
01###
/$#
$
/$#
© 2003 McGraw-Hill Ryerson Limited.
"
Deriving the Demand
Deriving the Demand
Curve for Good X,
Curve for Good X,
Figure A8-
Figure A8-
5a, p 197
5a, p 197
-
;
$*
#
© 2003 McGraw-Hill Ryerson Limited.
'
Deriving the Demand
Deriving the Demand
Curve for Good X,
Curve for Good X,
Figure A8-
Figure A8-
5b, p 197
5b, p 197
$
(##&
-
;
<
1 <$7
© 2003 McGraw-Hill Ryerson Limited
Describing
Describing
Consumer
Consumer
Preferences Using
Preferences Using
Indierence Curves
Indierence Curves
End of Chapter 8 Appendix
End of Chapter 8 Appendix
