Demand Curves © 1998 by Peter Berck 7/19/2019.

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Presentation transcript:

Demand Curves © 1998 by Peter Berck 7/19/2019

Theory From among those bundles he can afford, consumer chooses bundle that makes him happiest (maximizes his utility) Y = p1x1 + p2x2 gives bundles can afford Indifference curves shows preferences among bundles 7/19/2019

Choice at 3 Prices for Bread Price of Wine is 1 7/19/2019

Price-Quantity Chart The price of wine is 1. Price In Numbers Quantity High $4/loaf 10 Med. $2/loaf 22 Low $1/loaf 40 7/19/2019

Demand Curve Price In Numbers Quantity High $4/loaf 10 Med. $2/loaf 22 Low $1/loaf 40 7/19/2019

Income Shifts Demand Price of Wine is 1 Income In Numbers Quantity 80 $4/loaf 10 80 $2/loaf 22 100 $2/loaf 30 7/19/2019

One Point on a Demand Curve Shifted Out by Increased Income Income In Numbers Quantity 80 $4/loaf 10 80 $2/loaf 22 100 $2/loaf 30 7/19/2019

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