1. Demand And Consumer Behavior Chapter 5

3. Numerical Example 0 10 5 1 10 4 2 9 3 3 7 2 4 4 1 0 0 Mu T U Consumed Q

4. 10 5 10 4 9 3 7 2 4 1 0 0 T U Consumed Q

5. Marginal utility 0 1 2 3 4 Mu

7. From Individual to market demand curve Quantity 1 Quantity 2 Quantity Price Price D1 D2 Q=Q1+Q2 Market demand curve Price 1 2 3 5 5 5

11. Budget Line Pf = Rs40 Pc =Rs30 Slope = Pf/ Pc 6 0 4.5 1 3 2 1.5 3 0 4 Clothing Food

13. Change in Budget Line (Change in income) Clothing Food B2 B Y / Pf Y / Pc Y2 / Pc Y2 / Pf

14. Change in Budget Line (Change in Price) Clothing B2 B Y / Pf Y / Pf2 Y / Pc Price decrease

16. Table 60 55 49 42 35 24 6 55 50 45 39 32 22 5 49 45 40 35 28 20 4 42 39 35 30 24 17 3 35 32 28 24 20 14 2 24 22 20 17 14 10 1 Food 1 2 3 4 5 6 Clothing 1 6 2 3 3 2 6 1 Food Cloth Satisfaction level 24

17. Indifference Curve 1 1 6 2 3 3 2 6 1 Food Cloth Satisfaction level 24

18. Indifference Curve 2 60 55 49 42 35 24 6 55 50 45 39 32 22 5 49 45 40 35 28 20 4 42 39 35 30 24 17 3 35 32 28 24 20 14 2 24 22 20 17 14 10 1 Food 1 2 3 4 5 6 Clothing 2 6 4 3 6 2 Food Cloth Satisfaction level 35

20. Indifference Map

22. Marginal rate of substitution (slope) MRS = Δ C/ Δ F = 3/1

23. Perfect substitute & Perfect complement Orange Juice Apple Juice Right Shoe Left Shoe Food Clothing Q =1 a. Perfect substitute b. Perfect complement Typical IC lie between the extreme cases of straight lines and right angle. Along a curved IC, the ability to substitute one input for another varies.