ECON1004 Lecture Notes - Lecture 16: Budget Constraint, Utility, Standard Deviation
Document Summary
Demand functions - calculated from budget line and utility function. Mrs calculated by partial derivatives of utility or given prices usually changes w/ respect to price/income of itself or other good only depends on own price >> independent good remember that demand functions slope downward. Find the demand functions for food and clothing if a consumer"s utility function for the 2 was u = c0. 8f0. 2 budget constraint >> i = pcc + pff. F = (i-pcc) / pf need to get rid of f to find c demand function need to get rid of c to find f demand function. Mrs = uc / uf = pc / pf. 4fpf = cpc substitute that back into the budget constraint equations. 5/4 c = i/pc >> c = (4/5) (i/pc) F = (i-[4fpf]) / pf = i/pf - 4f. 1 probability of each case can change based on personal skills/tendencies. 3 expected values same >> variability not always the same.
