This week we will look at the standard Consumer Choice model and tie it in with the supply-and-demand model by deriving a consumer's individual Demand curve. We will study how Demand responds to a change in price in detail by decomposing this response into two parts. We will also briefly revisit income responses by looking at how individual demand varies with income. Finally, we may start on General Equilibrium.
Copies of the textbook should be on reserve at the library later this week; I'll send an email when they are available.
Regarding midterm prep. If you have any questions on anything covered so far, we should meet to go over it before the midterm on Friday, either at the office hours Tu Th 1:30-3:30 Kern 401 or at a separate appointment. As usual, feel free to come to office hours or make an appointment in a group. The workbook is essential to your preparation; so please contact me if you cannot find a copy.
- Topics: Consumer Choice, Applying Consumer Theory and maybe General Equilibrium
- Readings: Perloff 4, 5.1-5.3 and maybe 10.1-10.3, 10.5
- Practice: WB 5-9 and maybe 10, 11
- (Earlier stuff)
- Graphing them, labeling and interpreting intercepts
- Determining if a bundle is affordable or not
- Identifying a bundle X and Y, on the graph given expenditures on X and Y
- Finding and interpreting the slope
- Preferences — graphing them, etc.
- Solving the consumer's problem for Cobb-Douglas preferences
- (Earlier stuff)
- Decomposing the price response
New stuff on next week's quizzes (anticipated)
- General equilibrium in two markets
- General equilibrium in pure exchange/the Edgeworth box
- Graphing it
- Finding equilibrium
- Efficiency theorems, concepts, terms
- Production — returns to scale, graphing isoquants, etc.
- Cost minimization and deriving the cost function