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Study Guide Problem Set 11

The document is a study guide for a microeconomics class that contains 10 questions about individual demand functions. It includes: 1) Explaining why demand curves slope downward due to consumer behavior. 2) Constructing a demand curve diagram from a table of data and explaining how the curve would shift with changes in price, income, and prices of related goods like substitutes and complements. 3) Analyzing the effects of various changes like price increases/decreases, income increases/decreases, and price changes to substitutes and complements on the demand curve diagram. Students are instructed to show these effects clearly on separate diagrams for each question.

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54 views2 pages

Study Guide Problem Set 11

The document is a study guide for a microeconomics class that contains 10 questions about individual demand functions. It includes: 1) Explaining why demand curves slope downward due to consumer behavior. 2) Constructing a demand curve diagram from a table of data and explaining how the curve would shift with changes in price, income, and prices of related goods like substitutes and complements. 3) Analyzing the effects of various changes like price increases/decreases, income increases/decreases, and price changes to substitutes and complements on the demand curve diagram. Students are instructed to show these effects clearly on separate diagrams for each question.

Uploaded by

Reuben Ojo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Fall term 2019 Doçent Dr S.J. Terregrossa, Ph.

D
Study guide/Problem set 11: individual demand function (di)
ECO 191 Microeconomics Istanbul Aydin University

Using primarily information from the class lectures, in your lecture notes; and also the text,
answer the following questions:

1) Explain the underlying concept of a downward sloping demand curve. (In other words,
explain the main reason why a demand curve slopes downward.)

2) Individual i has a demand function for good x (di). Included in this demand function (but
not limited to) is the price of good x, the individual’s income (yi), her/his set of tastes
and preferences (T&P)i, and the prices of related goods (Po).

This demand function (di) in table form is given as:

p qd
10 2 units

8 4 units
6 6 units
4 8 units
2 10 units

(Note: It is advisable to use a different diagram for each of the below exercises.)

a) Construct the demand function (di) in diagram form.

b) Consider a price change from 4 to 10 , ceteris paribus. Explain the response of the
individual demander. Thoroughly indicate on the diagram. (Use the examples from
class or the text as a guide to your diagram indications.)

c) Consider a price change from 8 to 4 , ceteris paribus. Explain the response of the
individual demander. Thoroughly indicate on the diagram. (Use the examples from
class or the text as a guide to your diagram indications.)
d) Suppose the individual’s income (yi) increases. Explain the response of the individual
demander. Thoroughly indicate on the diagram. (Use the examples from class or
the text as a guide to your diagram indications.)

e) Suppose the individual’s income (yi) decreases. Explain the response of the individual
demander. Thoroughly indicate on the diagram. (Use the examples from class as a
guide to your diagram indications.)

f) Explain the different types of related products (substitutes and complements).

g) Explain how an increase in the price of a substitute (Po) affects the demand function
for good x. Thoroughly indicate on the diagram. (Use the examples from class or the
text as a guide to your diagram indications.)

h) Explain how a decrease in the price of a substitute (P o) affects the demand function
for good x. Thoroughly indicate on the diagram. (Use the examples from class or the
text as a guide to your diagram indications.)

i) Explain how an increase in the price of a complement (P o) affects the demand


function for good x. Thoroughly indicate on the diagram. (Use the examples from
class or the text as a guide to your diagram indications.)

j) Explain how a decrease in the price of a complement (P o) affects the demand


function for good x. Thoroughly indicate on the diagram. (Use the examples from
class or the text as a guide to your diagram indications.)

(Note: It is advisable to use a separate diagram for each of the above exercises.)

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