ECON 2300 : AP ECON 2300 F2012 Session 4.doc
4 Dec 2013
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Properties of demand functions: comparative statics analysis of ordinary demand functions -- the study of how ordinary demands x1*(p1,p2,y) and x2*(p1,p2,y) change as prices p1, p2 and income y change. Own-price changes: how does x1*(p1,p2,y) change as p1 changes, holding p2 and y constant, suppose only p1 increases, from p1" to p1"" and then to p1""". Ordinary demand curve for commodity 1 p1 p1""" p1"" p1" x1*(p1""") x1*(p1") x1*(p1"") x1* x1*(p1""") x1*(p1") x1*(p1"") Fixed p2 and y. p1 price offer curve p1 p1""" p1"" p1". Ordinary demand curve for commodity 1 x1*(p1""") x1*(p1") x1*(p1"") x1* x1*(p1""") x1*(p1") x1*(p1"") 18: the curve containing all the utility-maximizing bundles traced out as p1 changes, with p2 and y constant, is the p1- price offer curve. Page 1 of 12: the plot of the x1-coordinate of the p1- price offer curve against p1 is the ordinary demand curve for commodity 1, what does a p1 price-offer curve look like for cobb-douglas preferences, take xxu.
