Economics 2150A/B Study Guide - Midterm Guide: Al-Qaeda In The Arabian Peninsula, Emd Bl2, Normal Good
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ECON 2150A/B Full Course Notes
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Deriving demand curve from multiple indifference curves at different p_x. The consumer is maximizing utility at every point along the demand curve. Mrs falls along the demand curve as the price_x falls. The price_x is relative to good y as well, since the consumer will get more bang for the buck from good y for the buck from good y. The consumer will now substitute y for x. Rotation of budget line to match another point of indifference curve (utility is the same) Change in purchasing power for the good x. Parallel shift of budget line (doted to new budget line) Will bring the indifference curve to a new level (higher utility) For inferiorgoods, income effect is opposite, but substitution effect is the same. Inferior goods with income effect > substitution effect, therefore when price falls, q_d falls. U(x,y) = xy, mu_x = y, mu_y = x. P_y = , i=, p_x1 = , p_x2 = .