Microeconomics I
Fiches de réveisions
Fiches de réveisions
Kartei Details
| Karten | 336 |
|---|---|
| Sprache | English |
| Kategorie | VWL |
| Stufe | Universität |
| Erstellt / Aktualisiert | 28.05.2019 / 02.03.2025 |
| Weblink |
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Consumers' demand: perfect complements
Concave preferences
corner solution
Quasi-linear preferences
Establish the maximum utility
Express x2 from de budget constraint
Inject it into the utility function
Derive to get the FOC
Equalize the partial utility function according to the prices
Cobb-Douglas optimal choices
Solve with the lagrangian for good2
Application to tax choice
If the government wants to raise R of revenue, should it use a quantity tax or an income tax?
Income tax better than quantity tax.
Change in m: m'' < m <m'
Normal goods
(delta X, / delta m) > 0
Inferior goods
(delta x1 / delta m) < 0, use of public transports, low quality food
Income offer curve
Income expansion path
Engel curve
Perfect substitutes: One-to-one: with p < p : x1 = m/p1: income offer curve
Perfect substitutes: One-to-one: with p < p : x1 = m/p1: Engel curve
Perfect complements: income offer curve
x1= m/ (p1+p2)
Perfect complements: Engel curve
Cobb-Douglas utility function: income offer curve and Engel curve
Quasi-linear preferences: income demand curve and Engel curve
Change in prices
Ordinary goods VS Giffen goods
Price offer curve and demand curve with change of price
Perfect substitutes: price offer curve and demand curve
Perfect complements: price offer curve and demand curve
Discrete goods
Price effect and income effect with change in price: normal good
Price effect and income effect with change in price: giffen good
Slutsky decomposition: perfect complements
Subsitution effect = 0
Perfect substitutes: 3 scenari for change in demand
Quasilinear preferences
only substitution effect
Slutsky equation
Change with endowment income effect
Slutsky equation: an example
Assume the demand function is: x1(p1;p2;m) = 10 + 1m/10p1
Initially m = 120 and p1 = 3
Initial demand?
14
Slutsky equation, an example: Now suppose p1 diminishes to 2. New demand?
16
Slutsky equation: an example: substitution and income effect
Hicks substitution effect
change in demand when prices
change but a consumer’s utility is held constant (consumer is indifferent between the original bundle and the one he can now afford) ! roll the budget line around the indifference curve
Slutsky equation with calculus 1/2
Slutsky equation with calculus 2/2
With endowment: budget constraint, gross demand, net demand
Assumptions/notation:
I Nonlabour income
I Amount of consumption, price of consumption
I Amount of labour supplied, wage rate
Budget constraint
Further notation:
I Maximum amount of labour time
I Maximum consumption without work
I Leisure time
Budget constraint becomes
Labour supply starting with an endowment
Assume that leisure is a normal good. How does labour supply change when w augments?
