macroeconomic mcgrowhill micro ch 6 appendix 19e use this one

06A

McGraw-Hill/Irwin

Appendi
x
Consumer Behavior

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.


THE BUDGET LINE:
What is Attainable

The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

0 $12
3 12
6 12
9 12
12 12

Key Terms

12
10
Quantity of A

Appendix

8
6
4
2

Previous
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0

Next
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End
Show
21 appendix - 2

Copyright McGraw-Hill/Irwin, 2005

2

4

6

8

Quantity of B

10

12


THE BUDGET LINE:
What is Attainable

The Budget Line:
What is
Attainable

Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

0 $12
3 12
6 12
9 12
12 12

Key Terms

12
10

Quantity of A

Appendix

8
6
4
2

Previous
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0

Next
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End
Show
21 appendix - 3

Copyright McGraw-Hill/Irwin, 2005

2

4

6

8

Quantity of B

10

12


THE BUDGET LINE:
What is Attainable

The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6

4
2
0

0 $12
3 12
6 12
9 12
12 12

Key Terms

12
10
Quantity of A

Appendix

8
6
4
2

Previous
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0

Next
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End
Show
21 appendix - 4

Copyright McGraw-Hill/Irwin, 2005

2

4

6

8

Quantity of B

10

12


THE BUDGET LINE:
What is Attainable

The Budget Line:
What is
Attainable
Indifference
Curves: What is

Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

0 $12
3 12
6 12
9 12
12 12

Key Terms

12
10
Quantity of A

Appendix

8
6
4
2

Previous
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0

Next
Slide

End
Show
21 appendix - 5

Copyright McGraw-Hill/Irwin, 2005

2

4

6

8

Quantity of B

10

12


THE BUDGET LINE:
What is Attainable

The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2

0

0 $12
3 12
6 12
9 12
12 12

Key Terms

12
10
Quantity of A

Appendix

8
6
4
2

Previous
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0

Next
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End

Show
21 appendix - 6

Copyright McGraw-Hill/Irwin, 2005

2

4

6

8

Quantity of B

10

12


THE BUDGET LINE:
What is Attainable

The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at

Tangency
Deriving the
Demand Curve

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

0 $12
3 12
6 12
9 12
12 12

Key Terms

12
10
Quantity of A

Appendix

6
4
2

Previous
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0

Next
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End
Show
21 appendix - 7

Copyright McGraw-Hill/Irwin, 2005

(Unattainable)

8

(Attainable)
2

4

6

8

Quantity of B

10

12


THE BUDGET LINE:
What is Attainable

The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve
Key Terms

Previous
Slide

Units of Units of
A Price B Price
Total
$1.50

$1.00 Expenditures

8
6
4
2
0

0 $12
10
e
3 12
m
o
c
n
i
n
6 12 as8e i
f
(Unattainable)
o
e
e
s
r
a
c
h
n

I
9
12
c
r
u
An
p
h
t
6
e
o
h
b
t
12 ke12
s
r or

e
h
t
ma
i
e
4
f
e
o

l
b
e
i
r
s
s
mo
o
p
(Attainable)
s
m
2
e
t
i
0

Next
Slide

End
Show
21 appendix - 8

12

Quantity of A

Appendix

Copyright McGraw-Hill/Irwin, 2005

2

4

6

8

Quantity of B

10

12


THE BUDGET LINE:
What is Attainable

The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency

Deriving the
Demand Curve

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

12

0 $12
10
3Pric
12e ch
a
nges c
a c6 ha12
ause
(Unattainable)
nge i8n
de9ma12n 6 the quanti
ty
12 12 ded of t

Key Terms

Quantity of A

Appendix

4
2

Previous
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0

Next
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End
Show
21 appendix - 9

Copyright McGraw-Hill/Irwin, 2005

he item
s

(Attainable)
2

4

6

8

Quantity of B

10

12


INDIFFERENCE CURVES
What is Preferred

The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve
Key Terms

Units of Units of
A Price B Price

Total
$1.50
$1.00 Expenditures

8
6
4
2
0

An Indifference
Schedule

Combination

j
Previous
Slide

0 $12
3 12
6 12
9 12
12 12
Units
of A

Units
of B

12

2

Next
Slide

End
Show
21 appendix - 10

Copyright McGraw-Hill/Irwin, 2005

j

12
10
Quantity of A

Appendix

8
6
4
2
0

2

4

6

8

Quantity of B

10

12


The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve
Key Terms

Previous
Slide

What is Preferred

Units of Units of

A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

An Indifference
Schedule

Combination

Next
Slide

End
Show
21 appendix - 11

0 $12
3 12
6 12
9 12
12 12

j

k

Units
of A

Units
of B

12
6

2
4

Copyright McGraw-Hill/Irwin, 2005

j

12
10
Quantity of A

Appendix

INDIFFERENCE CURVES

8

k

6
4
2
0

2

4

6

8

Quantity of B

10

12


The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve

Key Terms

Previous
Slide

What is Preferred

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

An Indifference
Schedule

Combination

Next
Slide

End
Show
21 appendix - 12

0 $12
3 12
6 12
9 12
12 12

j
k
l

Units
of A

Units
of B

12
6
4

2
4
6

Copyright McGraw-Hill/Irwin, 2005

j

12

10
Quantity of A

Appendix

INDIFFERENCE CURVES

8

k

6

l

4
2
0

2

4

6

8

Quantity of B

10

12


The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve
Key Terms

Previous
Slide

Next
Slide

End
Show
21 appendix - 13

What is Preferred

Units of Units of
A Price B Price

Total
$1.50
$1.00 Expenditures

8
6
4
2
0

0 $12
3 12
6 12
9 12
12 12

An Indifference
Schedule

Combination

Units
of A

j
k
l
m

12

6
4
3

Units
of B

2
4
6
8

Copyright McGraw-Hill/Irwin, 2005

j

12
10
Quantity of A

Appendix

INDIFFERENCE CURVES

8

k

6

l

4

m

2
0

2

4

6

8

Quantity of B

10

12


The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred

Equilibrium at
Tangency
Deriving the
Demand Curve
Key Terms

Previous
Slide

Next
Slide

End
Show
21 appendix - 14

What is Preferred

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

0 $12
3 12
6 12
9 12
12 12

An Indifference
Schedule

Combination

Units
of A

j
k
l
m

12
6
4
3

Units
of B

2
4
6

8

Copyright McGraw-Hill/Irwin, 2005

j

12
10
Quantity of A

Appendix

INDIFFERENCE CURVES

8

k

6

l

4

m
I

2
0

2

4

6

8

Quantity of B

10

12


The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve
Key Terms

Previous
Slide

Next
Slide

End
Show
21 appendix - 15

What is Preferred

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

0 $12
3 12
6 12
9 12
12 12

An Indifference
Schedule

Combination

Units
of A

j
k
l
m

12
6
4
3

Units
of B

2
4
6
8

Copyright McGraw-Hill/Irwin, 2005

j

12
10
Quantity of A

Appendix

INDIFFERENCE CURVES

8

k

6

The slope
represents
the marginal
rate of substitution, (MRS)

l

4

m
I2

2
0

I1

2

4

6

8

Quantity of B

10

12


Appendix
The Budget Line:
What is
Attainable

INDIFFERENCE CURVES
What is Preferred

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

12

Quantity of A

8
0 $12
Indifference
10
6
3
12
Curves: What is
Preferred
4
6 12 er 8
m
u
Equilibrium at
s
2e co9n 12 ome,
Tangency
c
6
th0 12er in
f
I
12
Deriving the
or
eat

r
r Indifference

e
g
h
t
d
An
i
a
e
4ld
h
f
u
o
o
eSchedule
c
Key Terms
r
s
o
t
CombiUnits
Units
c
m nation oof d
u of B d 2
A
r
e

p
s
h
a
t
h
bo j p12urc 2
e
b
0
k
6
4
Next
Previous
Demand Curve

Slide

Slide

End
Show
21 appendix - 16

l
m

4
3

6
8

Copyright McGraw-Hill/Irwin, 2005

I1

2

4

6

8

Quantity of B

10

12


INDIFFERENCE CURVES
What is Preferred

The Budget Line:
What is
Attainable
Indifference

Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve
Key Terms

Previous
Slide

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

0 $12
3 12
6 12
9 12
12
igh12er

12
10
Quantity of A

Appendix

8
6

h
A
An Indifference
4
n
o
i
t
Schedule
a
n
i
b
com
2ll
i
w
jcho
12ice2s
of k 6 e4 rred0
f

e
r
p
bl e 4 6
Combination

Units
of A

Units
of B

Next
Slide

End
Show
21 appendix - 17

m

3

I4
I3

8

Copyright McGraw-Hill/Irwin, 2005

I2

I1

2

4

6

8

Quantity of B

10

12


The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency

Previous
Slide

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

12

8
0 $12
10
6
3 12
4
6 12
8
2
9 ily12of all
am
f
6s of
A
n
0 12 re12ssio

p
x
e
e

h
b
n
4
a
suc
c
e
c
n
e
r
e
y
f
f
r
i
e
d
v
e
in
r 2
o
f
d
e
p
o

l
e
v
e
d j 12 f2income
o
l
e
0
v
k le 6
4
Next
2

Deriving the
Demand Curve
Key Terms

What is Preferred

An Indifference
Schedule

Combination

Slide

End
Show

21 appendix - 18

l
m

Units
of A

4
3

An
Indifference
Map

Quantity of A

Appendix

INDIFFERENCE CURVES

I4
I3

Units
of B

6
8

Copyright McGraw-Hill/Irwin, 2005

I2

I1

4

6

8

Quantity of B

10

12


The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve
Key Terms

Previous
Slide

Next
Slide

End
Show
21 appendix - 19

Units of Units of
A Price B Price
Total
$1.50
$1.00 Expenditures

8
6
4
2
0

0 $12
3 12
6 12
9 12
12 12

An Indifference

Schedule

Combination

Units
of A

j
k
l
m

12
6
4
3

Units
of B

2
4
6
8

Copyright McGraw-Hill/Irwin, 2005

12
10
Quantity of A

Appendix

EQUILIBRIUM AT TANGENCY

(Unattainable)

8
6
4
2
0

I4
I3
I2

(Attainable)
2

4

6

I1

8

Quantity of B

10

12


The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency
Deriving the
Demand Curve
Key Terms

Previous
Slide

Equilibrium
12
occurs when
the consumer 10
selects the
8
combination
which reaches 6
the highest
4

attainable
indifference
2
curve.
0

Next
Slide

End
Show
21 appendix - 20

(Unattainable)

Quantity of A

Appendix

EQUILIBRIUM AT TANGENCY

Copyright McGraw-Hill/Irwin, 2005

I4
I3
I2

(Attainable)
2

4

6

I1

8

Quantity of B

10

12


What happens if the price of B
increases to $1.50?

The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred

The budget line
rotates reflecting
the reduction in
the quantity of B
units which is

attainable.

12
PriceB QuantityB 10

$1.00

6

Equilibrium at
Tangency
Deriving the
Demand Curve
Key Terms

Quantity of A

Appendix

EQUILIBRIUM AT TANGENCY

8
6
4

I3

2
Previous
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0

Next
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End
Show
21 appendix - 21

Copyright McGraw-Hill/Irwin, 2005

2

4

6

8

Quantity of B

10

12


What happens if the price of B
increases to $1.50?

The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred
Equilibrium at
Tangency

PriceB QuantityB 10

$1.00
1.50

6
3

Deriving the
Demand Curve
Key Terms

Previous
Slide

Next
Slide

End
Show
21 appendix - 22

The budget line
rotates reflecting
the reduction in
the quantity of B
units which is
attainable.

12

Quantity of A

Appendix

EQUILIBRIUM AT TANGENCY

8
6
4

By recording the 2
various quantities
0
demanded at the
various prices yields
the Demand schedule
Copyright McGraw-Hill/Irwin, 2005

I3

I2

2

4

6

8

Quantity of B

10

12


DERIVING THE DEMAND CURVE

Appendix

What happens if the price of B
increases to $1.50?

The Budget Line:
What is
Attainable
Indifference
Curves: What is
Preferred

Equilibrium at
Tangency

Price of B
PriceB QuantityB

$1.00
1.50

6
3

Deriving the
Demand Curve

1.00

Key Terms

Previous
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End
Show
21 appendix - 23

$1.50

Plotting the
Points yields the
Demand Curve
for Product B

By recording the
various quantities
0
demanded at the
2
various prices yields
the demand schedule.
Copyright McGraw-Hill/Irwin, 2005

DB
4

6

8

Quantity of B

10

12


Key Terms

budget line
indifference curve
marginal rate of substitution (MRS)
indifference map
equilibrium position

Copyright McGraw-Hill/Irwin, Inc. 2005

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END