Consumer Demand

Question 1

Demand Curve

Answer 1

the relationship between price and quantity
- we actually graph the inverse demand curve

Question 2

Demand Curve for Perfect Substitutes

Answer 2

X = M/Px
Three parts of the curve
- Px/Py > MUx/MUy
- P/Py = MUx/MUy
- Px/Py < MYx/MUy

Question 3

Demand Curve for Perfect Complements

Answer 3

X = M/(Px+Py)
- Inverse Demand Curve: Px = M/x - Py (what we graph)

Question 4

Demand Curve for Cob Douglas

Answer 4

X = a/a+b M/px
Monotonic Tranformation: U = alnx + blny

Question 5

Normal Goods

Answer 5

the demand for a good increases when income increases and decreases when income decreases
- quantity demanded always changes in the same way income changes

Question 6

Inferior Goods

Answer 6

an increase of income results in a reduction in the consumption of the good
- demand decreases as income increases

Question 7

Comparative Static

Answer 7

what happens to one variable when another variable changes
-derivative