Intermediate Microeconomics · free preview

Own-Price Demand and the Giffen Frontier

Hold income fixed and move one price, the budget pivots and the choices trace the price offer curve, projecting one good's quantity against its own price draws its demand curve, downward for ordinary goods and, in the extreme inferior case, upward for Giffen goods.

1. Pivoting the budget

Pivoting the budget

2. Ordinary and Giffen behavior

Ordinary and Giffen behavior

3. The cross-price companion

The cross-price companion

4. Demand curves as objects with rules

Demand curves as objects with rules

5. The Cobb-Douglas demand shape

For u equal to x1 x2 with m 100 and p2 1, demand is x1 equals 50 over p1. What shape and elasticity?

6. The Giffen requirements

Which combination of properties must a Giffen good have?

7. Cross-price zeros

What does Cobb-Douglas imply for the cross-price derivative of demand, and what breaks this in richer families?

8. Reading a movement versus a shift

Coffee's price falls and consumers buy more coffee. Later, incomes rise and the whole coffee demand curve moves right. Which is a shift?

9. Demand at a price

For u equal to x1 x2 with m 100 and p2 1, compute x1 when p1 equals 2, and write the number.

10. Demand after a price rise

Same consumer, p1 rises to 5, compute the new quantity, and write the number.

11. The hyperbola's elasticity

For x1 star equal to 50 over p1, what is the own-price elasticity everywhere along the curve?

12. Moving along versus shifting

For x1 star equal to 50 over p1, the price falls from 2 to 1. What is the move?

13. The silent neighbor

For the same consumer, the price of good two rises from 1 to 2 while p1 stays 2. What happens to x1?

14. Constant spending

Along the demand curve x1 star equal to 50 over p1, what does total spending on good one do?

15. Demand at a low price

For x1 star equal to 50 over p1, compute x1 when the price is 1, and write the number.

16. Demand at a high price

For x1 star equal to 50 over p1, compute x1 when the price is 10, and write the number.

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