(无异曲线等比例放大缩小).pptVIP

Chapter 6 Demand The demand function gives the optimal amounts of each of the goods as a function of the prices and income faced by the consumer: x1 (p1, p2, m) We now change the arguments in the demand function one by one. ?x1/?m 0: good 1 is a normal good ?x1/?m 0: inferior (depends on the income level we are talking about: bus, MRT, taxi) Two ways to look at the same thing (1) At x1 – x2 space, connect the demanded bundles as the budget line gets shifted outward. This curve is called the income offer curve (IOC) or income expansion path. (2) At x1 – m space, connect the optimal x1 bundles as the income increases while holding all prices fixed. This curve is called the Engel curve. Draw a general preference to illustrate the income offer curve and the Engel curve. Perfect substitutes: p1 p2, IOC (x axis), Engel (sloped p1) think about p1 p2 and p1 = p2. Perfect complements: IOC (at the corner), Engel (sloped p1+ p2) Cobb-Douglas: x1 = am/ p1 and x2 = (1-a)m/ p2 so x1/x2 is constant, thus IOC (line), Engel (sloped p1/a)) In the above three cases, (?x1/ x1)/(?m/m) = 1. They all belong to homothetic preferences. If (x1, x2) w (y1, y2), then for all t 0, (tx1, tx2) w (ty1, ty2). (無異曲線等比例放大縮小) If (x1, x2) is optimal at m, then (tx1, tx2) is optimal at tm. Suppose not, then (y1, y2) is feasible at tm and (y1, y2) s (tx1, tx2). Then (y1, y2) w (tx1, tx2) and it is not the case that (tx1, tx2) w (y1, y2). However, (y1/t, y2/t) is feasible at m, so (x1, x2) w (y1/t, y2/t). By homothetic preferences, (tx1, tx2) w (y1, y2), a contradiction. Reasonable? (toothpaste) Quasilinear preferences: p1 = p2 =1, u(x1, x2) = √x1 + x2 MU1 = 1/(2 √x1), MU2 = 1, MU1/p1 = MU2/p2 implies x1 = ? IOC: on the x-axis up to (1/4,0), then becomes vertical Engel: sloped 1 up to (1/4, 1/4), then becomes vertical “zero income effect” only after some point ?x1/?p1 0: good 1 is a Giffen good ?x1/?p1 0: good 1 is an ordinary good Two ways to look at the same thing (1) At x1 – x2 space,