FHCE 3150 Chapter Notes - Chapter 4-6: Veganism, Giffen Good, Inferior Good

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amaranthsquirrel732

28 Mar 2017

School

University of Georgia

Department

Financial Planning, Housing and Consumer Economics

Course

FHCE 3150

Professor

Patryk Babiarz

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Document Summary

Whether we spend more or less on a good when its price changes. Opposite direction from the substitution effect for an inferior good. Comparing the income effects between salt and housing. For a giffen good, the income effect is. % change in q resulting from a 1% change in price (same for income elasticity) Elastic at price 16 (16 = 24-6q -1. 33) Set of optimal bundles traced on an indifference map as the price of x changes and price of y and income stay the same. Icc for good x is traced as income changes (price of x and y are constant) Plots the relationship between the quantity of good x consumed and income. Normal good: q increases and income increases. Income and substitution effects on a price change. Substitution effect: purchase less of an item and use something else in its place. Income effect: economize by buying even less of the item in question because you feel poorer.

Related Questions

budget line

marginal utility

complete property of preferences

market demand

consumption bundle

substitution effect

Giffen good

total effect

income effect

transitive property of preferences

indifference curves

utility

the marginal rate of substitution

utility function

1.	_____	The satisfaction or benefit that consumers receive from consuming goods or services.
2.	________________ _	A particular combination of specific quantities of goods or services
3.	________________ _	Consumers can rank all conceivable bundles of goods or services
4.	_____	If A is preferred to B, and B is preferred to C, then A is always preferred to C.
5.	_____	Equation showing a consumerâs perception of the total utility forthcoming from consuming each bundle of goods and services.
6.	_____	A set of consumption bundles each and every one of which provides a consumer with exactly the same level of total utility.
7.	_____	The number of units of Y that must be given up for total utility to remain the same when one more unit of X is consumed.
8.	_____	The addition to total utility attributable to consuming one more unit of a good, holding the consumption of all other goods constant.
9.	_____	The line showing all bundles of goods that can be purchased at given prices if the entire income is spent.
10.	_____	The change in the consumption of a good that would result if the consumer remained on the original indifference curve after the price of the good changes.
11.	_____	The change in consumption of goods results strictly from the change in purchasing power after the price of a good changes.
12.	________________ _	The sum of the substitution and income effects.
13.	_____	A good for which quantity demanded varies directly with price, causing an upward sloping demand curve.
14.	_____	A list of prices and the corresponding quantity consumers are willing and able to purchase at each price.

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Which of the following describes a Giffin good? Following a price change B the income effect is opposite and smaller than the substitution effect. the income effect is opposite and greater than the substitution effect the substitution effect is equal to the income effect. the substitution effect is zero, while the income effect is the same as for an inferior good. D

Suppose the own price elasticity of demand for good X is -3, its income elasticity is 2, and the cross price elasticity of demand between good X and Y is -5. Determine how much the consumption of this good will change if:

- The price of good X increases by 5%

- The price of good Y increases by 12%

FHCE 3150 Chapter Notes - Chapter 4-6: Veganism, Giffen Good, Inferior Good

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