STUDY OF CONSUMERS BEHAVIOUR PART II : STUDY OF CONSUMERS BEHAVIOUR PART II PREPAREDBY:-
D.N.TIWARI
PGT(ECO)
JNV BAHRAICH UP
: Applying Consumer Theory
Slide 3 : Deriving an
Individual’s Demand Curve 4.3 5.2 12.0 2.8 12.0 6.0 4.0 26.7 0 44.5 58.9 L 1 ( p b = $12) p b , $ per unit L 2 ( p b = $6) L 3 ( p b = $4) 26.7 0 44.5 58.9 e 3 e 2 e 1 E 3 E 2 E 1 I 1 I 2 I 3 Beer, Gallons per year Beer, Gallons per year D 1 , Demand for beer Price-consumption curve Wine, Gallons per year (a) Indifference Curves and Budget Constraints (b) Demand Curve
Slide 4 : Effect of a Budget
Increase on an Individual’s
Demand Curve per year Income-consumption curve Engel curve for beer 0 2.8 4.8 7.1 49.1 38.2 26.7 Beer, Gallons per year 0 12 0 49.1 38.2 26.7 Beer, Gallons per year 49.1 38.2 26.7 Beer, Gallons per year I 2 I 3 I 1 (a) Indifference Curves and Budget Constraints Price of beer, $ per unit (b) Demand Curves Y , Budget (c) Engel Curve e 2 e 3 E 3 E 1 E 2 Y 1 = $419 Y 2 = $628 Y 3 = $837 L 3 L 2 L 1 e 1 D 1 D 2 D 3 E 1 * E 2 * E 3 * Wine, Gallons
Slide 5 : Solved Problem Y 2 / p * Y 1 / p * Y 1 = pq 1 Y 2 = pq 2 q 1 = Y 1 / p q 2 = Y 2 / p L 1 Y , Income per week L 2 e 2 e 1 E 2 E 1 p 1 I 1 I 2 q , Cans of Cragmont per week q 1 q 2 q , Cans of Cragmont per week *, Cans of Canada Dry per week (a) Indifference Curves and Budget Constraints (b) Engel Curve Cragmont Engel curve q
Slide 6 : Income-Consumption Curves and Income Elasticities Housing, Square feet per year Food, Pounds per year Food normal, housing normal Food inferior, housing normal Food normal, housing inferior b c e a L 1 L 2 I ICC 2 ICC 1 ICC 3
Slide 7 : A Good That
Is Both Inferior and Normal Y 2 Y 1 Y 1 Y 2 Y 3 Y 3 L 1 Y , Income L 2 L 3 e 2 e 3 e 1 E 2 E 3 E 1 I 1 I 2 I 3 Hamburger per year Income-consumption curve Hamburger per year All other goods per year (a) Indifference Curves and Budget Constraints (b) Engel Curve Engel curve
Slide 8 : Substitution and Income Effects with Normal Goods Wine, Gallons per year 12.0 5.5 0 58.9 26.7 30.6 Substitution effect Total effect Income effect Beer, Gallons per year I 2 I 1 L * L 2 L 1 e 2 e 1 e *
Slide 9 : Giffen Good Basketball, Tickets per year Movies, Tickets per year L 1 L * Total effect Income effect Substitution effect L 2 e 1 e 2 e * I 1 I 2
Slide 10 : The Consumer Price Index C 2 C 1 C , Units of clothing per year e 2 e 1 I 1 L 1 e * L * L 2 I 2 F , Units of food per year Y 2 */ p 2 F Y 1 / p 1 F Y 1 / p 1 C Y */ p 2 C F 2 F 1 Y 2 / p 2 F Y 2 / p 2 C
Slide 11 : Cost-of-Living Adjustments
Slide 12 : Demand for Leisure Y , Goods per day Time constraint H 2 = 12 H 1 = 8 24 0 N 2 = 12 N 1 = 16 0 24 H , Work hours per day N , Leisure hours per day H 2 = 12 H 1 = 8 N 2 = 12 N 1 = 16 0 H , Work hours per day N , Leisure hours per day Demand for leisure I 2 I 1 1 – w 2 L 1 L 2 (a) Indifference Curves and Constraints w , Wage per hour (b) Demand Curve – w 1 1 e 2 Y 2 Y 1 w 1 w 2 e 1 E 2 E 1
Slide 13 : Y , Goods per day (a) Leisure Normal Time constraint H 2 H 1 24 0 H , Work hours per day L 2 I 2 I 1 L 1 Y * e 2 e 1
Slide 14 : H 3 Y , Goods per day (b) Leisure Inferior Time constraint H 1 24 0 H , Work hours per day L 2 I 1 L 1 Y * e 1 I 3 e 3
Slide 15 : Supply Curve of Labor w , Wage per hour (a) Leisure Demand Demand for leisure w 1 w 2 16 12 0 N , Leisure hours per day E 1 E 2 w , Wage per hour (b) Labor Supply Supply of work hours w 1 w 2 8 12 0 H , Work hours per day e 2 e 1
Slide 16 : Income and Substitution Effects of a Wage Change Y , Goods per day Time constraint H 2 H * H 1 24 0 N 2 N * N 1 0 24 Substitution effect Income effect Total effect H , Work hours per day N , Leisure hours per day I 2 I 1 L 2 L * L 1 e 2 e 1 e *
Slide 17 : Application Leisure-Income Choices of Textile Workers Y , Goods per week 55 25 45 75 42.4 57.6 29.5 70.5 42.9 57.1 H , Work hours per week N , Leisure hours per week I 2 I 1 L 2 L * L 1 91.18 200 88.69 0 e 1 e 2 e *
Slide 18 : Labor Supply Curve That Slopes Upward and
Then Bends Backward Y , Goods per day (a) Labor-Leisure Choice Time constraint H 2 H 3 H 1 24 0 H , Work hours per day L 2 I 2 I 3 I 1 L 3 L 1 e 2 e 1 e 3
Slide 19 : Labor Supply Curve That Slopes Upward and
Then Bends Backward E 1 E 3 E 2 w , Wage per hour (b) Supply Curve of Labor Supply curve of labor H 2 H 3 H 1 24 0 H , Work hours per day
Slide 20 : Relationship of Tax Revenue to Tax Rates 600 800 400 200 Tax revenue, $ 50 0 t * = 79 100 t , Marginal tax rate, % Tax revenue
THANK YOU : THANK YOU PREPARED AND PRESENTED BY :-
D.N.TIWARI
PGT(ECO)
JNV BAHRAICH UP