《微观经济学》清华大学 Ch8 Slutsky Equation.pptVIP

Chapter Eight Slutsky Equation What Are We Doing in this Chapter? We take a further look at the comparative statics of demand function with respect to prices; We divide the changes in demand due to price changes into two effects: Substitution effect; Income effect? Why? Deeper economic intuition. Effects of a Price Change What happens when a commodity’s price decreases? Substitution effect: the commodity is relatively cheaper, so consumers substitute it for now relatively more expensive other commodities. Effects of a Price Change Income effect: the consumer’s budget of $y can purchase more