Economics 1021A/B Lecture Notes - Lecture 6: Ceteris Paribus, Fajita, Indifference Curve

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Margaret Loudermilk

Document Summary

Ec 1021 - lecture 6 thursday january 24th, 2013. Chapter 9 review: general form of budget, p1q + p2q = y, (expenditure)=(nominal income) Q1: real income: income expressed as a quantity of goods and services affordable. 5 movies. 10 14 qm: pp = , y = , pm = 4, when pm = , qp = 6, qm = 2, when pm = , qp = 4, qm = 6 shoes pop. 10: consumer will always choose the affordable point (everything in combined area is affordable) with the highest utility which occurs where the ic is tangent to the budget line. Qm: change in prices = income effect and substitution effect, the decrease in the price of movies increases. Lisa"s real income in terms of movies (y/pm) so now a point on i2 is affordable and has higher utility so lisa changes consumption. Demand: you demand an item if, you want it, can afford it, plan to buy it.