What is "the set of utility-maximizing commodity bundles traced out as the price of one commodity changes, ceteris paribus" called?
The set of utility-maximizing commodity bundles traced out as the price of one
commodity changes, ceteris paribus is called Price-Consumption Curve.
What does the Lain phrase “ceteris paribus” mean?
Rather than repeating “other things being
the same” again and again, we use the Latin phrase
“ceteris paribus” to indicate that we keep all the
other variables constant in the analysis.
How do we obtain the price-consumption curve on the commodity space?
We obtain the price-consumption curve on the commodity space by varying the price of X.
What does the shift of the entire demand curve ındicate?
The shift of the entire demand curve indicates a change in the demand.
What are substitutes?
Substitutes are goods that satisfy similar needs,
What are complements?
Complements are goods that the consumer consumes jointly to satisfy a need.
What is income-Consumption Curve?
Income-Consumption Curve
is the curve showing the set of utilitymaximizing commodity bundles traced out
as the monetary income of the consumer
changes, ceteris paribus.
If the demand for a good is positively related with income, what do we call these goods?
If the demand for a good
is positively related with income those commodities are
called normal goods.
If we trace the new consumer equilibriums, what kind of curve we obtain?
If we trace the
new consumer equilibriums, we obtain another curve, the
income-consumption curve.
If we explicitly trace the monetary income and amount of one of the commodities, which curve do we obtain?
If we explicitly trace the monetary income and amount of one of the commodities, we obtain the Engel Curve.
What do the Engel Curve relate?
Engel Curve relates the quantity of good demanded to income.
For which kind of goods quantity demanded decreases (increases) as income increases (decreases)?
For inferior goods quantity demanded decreases (increases) as income increases (decreases).
What is the change in demand due to lower (higher)
real purchasing power? i
The change in demand due to lower (higher)
real purchasing power is called the income
effect (IE).
What is the substitution effect?
Change in the quantity demanded of a good
in response to a change in the price in its price,
keeping the satisfaction level of the consumer
constant, is called the substitution effect.
How do we define own-price elasticity of demand (or in short price elasticity)?
Own-price elasticity of demand (or in short price elasticity) is defined as the percentage change in
quantity demanded over the percentage change in the own-price of the commodity.
When can we consider a demand as PERFECTLY ELASTIC?
Demand is PERFECTLY ELASTIC if the percentage change in the quantity goes to infinity even for a very small change in price.
When does the demand become INELASTIC?
Demand is INELASTIC if the percentage change in the quantity is less than the percentage change in price, making absolute value of the elasticity between 0 and 1.
What is cross-price elasticity of demand (or in short cross-elasticity)?
The cross-price elasticity of demand (or in short cross-elasticity) is defined as the percentage change in the quantity demanded of one good X, over the percentage change in the price of the other good Y.
What do we learn when the Engel curve is positively sloped?
When the Engel curve is positively sloped the good is normal and when it is negatively sloped the good is inferior for the consumer.
When the elasticity of demand is always equal to one on each and every point on the demand curve, what result do we obtain?
What happens if the elasticity of demand is always equal to one on each and every point on the demand curve? The result is unitary elastic demand curve.