1. Chapter 3 Demand Theory www.slideshare.net/themhk

3. www.slideshare.net/themhk Individual Consumer’s Demand Qd X = f(P X , I, P Y , T) quantity demanded of commodity X by an individual per time period price per unit of commodity X consumer’s income price of related (substitute or complementary) commodity tastes of the consumer Qd X = P X = I = P Y = T =

4. www.slideshare.net/themhk Qd X = f(P X , I, P Y , T)  Qd X /  P X < 0  Qd X /  I > 0 if a good is normal  Qd X /  I < 0 if a good is inferior  Qd X /  P Y > 0 if X and Y are substitutes  Qd X /  P Y < 0 if X and Y are complements

6. www.slideshare.net/themhk

7. www.slideshare.net/themhk Market Demand Function QD X = f(P X , N, I, P Y , T) quantity demanded of commodity X price per unit of commodity X number of consumers on the market consumer income price of related (substitute or complementary) commodity consumer tastes QD X = P X = N = I = P Y = T =

9. www.slideshare.net/themhk Q X = a 0 + a 1 P X + a 2 N + a 3 I + a 4 P Y + a 5 T P X Q X Intercept: a 0 + a 2 N + a 3 I + a 4 P Y + a 5 T Slope:  Q X /  P X = a 1

10. www.slideshare.net/themhk Linear Function Point Definition

11. www.slideshare.net/themhk Arc Definition

12. www.slideshare.net/themhk

13. www.slideshare.net/themhk P X Q X MR X

14. www.slideshare.net/themhk TR Q X MR<0 MR>0 MR=0

17. www.slideshare.net/themhk Linear Function Point Definition

18. www.slideshare.net/themhk Arc Definition Normal Good Inferior Good

19. www.slideshare.net/themhk Linear Function Point Definition

20. www.slideshare.net/themhk Arc Definition Substitutes Complements