Applying Consumer Theory Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 01 Deriving an Individual s Demand Curve a Indifference Curves and Budget Constraints Wine Gallons per year 12 0 e3 5 2 4 3 2 8 e2 I3 e1 I2 I1 L 1 pb 12 0 Price consumption curve 26 7 44 5 L2 pb 6 58 9 L 3 pb 4 Beer Gallons per year b Demand Curve p b per unit 12 0 E1 E2 6 0 E3 4 0 0 D1 Demand for beer 26 7 44 5 58 9 Beer Gallons per year Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 02 Effect of a Budget Increase on an Individual s Demand Curve a Indifference Curves and Budget Constraints Wine Gallons per year L3 L2 Income consumption curve L1 7 1 4 8 2 8 0 b Demand Curves e3 e2 e1 I1 26 7 38 2 49 1 I2 I3 Beer Gallons per year Price of beer per unit 12 E1 E2 E3 D3 D2 D1 0 c Engel Curve 26 7 38 2 49 1 Beer Gallons per year Y Budget Engel curve for beer Y3 837 E3 Y2 628 Y1 419 0 E2 E 1 26 7 38 2 49 1 Beer Gallons per year Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Solved Problem 5 1 a Indifference Curves and Budget Constraints q Cans of Canada Dry per week Y2 p I2 L2 I1 Y1 p L1 e1 q1 Y1 p e2 q2 Y2 p q Cans of Cragmont per week b Engel Curve Y Income per week Cragmont Engel curve Y2 pq 2 E2 Y1 pq1 E1 p 1 q1 q2 q Cans of Cragmont per week Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 03 Income Consumption Curves and Income Elasticities Housing Square feet per year Food inferior housing normal L2 ICC 1 a Food normal housing normal ICC 2 b L1 e c ICC 3 Food normal housing inferior I Food Pounds per year Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 04 A Good That Is Both Inferior and Normal a Indifference Curves and Budget Constraints All other goods per year 3 Y3 L Y2 Income consumption curve L2 e3 1 Y1 L I3 e2 e1 I2 I1 Hamburger per year b Engel Curve Y Income Y3 E3 Y2 E2 Engel curve Y1 E1 Hamburger per year Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 05 Substitution and Income Effects with Normal Goods Wine Gallons per year 12 0 L2 L1 e2 5 5 L I2 e1 e I1 0 26 7 30 6 58 9 Substitution Income effect effect Total effect Beer Gallons per year Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 06 Giffen Good Basketball Tickets per year L2 e2 L1 I2 L e1 e Total effect Substitution effect I1 Movies Tickets per year Income effect Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 07 The Consumer Price Index C Units of clothing per year Y1 p 1C Y2 p 2C Y p 2C C1 e1 e2 C2 e I2 I1 L1 F1 F2 Y1 p 1F L L2 Y 2 p 2F Y2 p 2F F Units of food per year Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Table 5 01 Cost of Living Adjustments Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 08 Demand for Leisure a Indifference Curves and Constraints Y Goods per day Time constraint I2 L2 w2 I1 1 e2 Y2 L1 w 1 1 e1 Y1 0 24 N 2 12 H2 12 N1 16 H1 8 24 0 N Leisure hours per day H Work hours per day b Demand Curve w Wage per hour E2 w2 E1 w1 Demand for leisure 0 N2 12 H2 12 N 1 16 H1 8 N Leisure hours per day H Work hours per day Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Solved Problem 5 3a a Leisure Normal Y Goods per day Time constraint L2 L1 e2 e1 I2 I1 Y 24 H1 H 2 0 H Work hours per day Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Solved Problem 5 3b b Leisure Inferior Y Goods per day Time constraint L2 L1 e3 e1 I3 I1 Y 24 H 3 H1 0 H Work hours per day Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 09 Supply Curve of Labor a Leisure Demand w Wage per hour w2 w1 0 b Labor Supply Demand for leisure E2 E1 12 16 N Leisure hours per day Supply of work hours w Wage per hour w2 w1 0 e2 e1 8 12 H Work hours per day Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 10 Income and Substitution Effects of a Wage Change Y Goods per day Time constraint I2 L2 I1 L e2 e L1 0 24 e1 N1 N 2 H1 H 2 N H 24 0 N Leisure hours per day H Work hours per day Substitution effect Total effect Income effect Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Application Leisure Income Choices of Textile Workers Y Goods per week I1 I2 200 L2 1 91 18 L 88 69 e e2 e1 L 0 45 55 57 1 57 6 42 9 42 4 70 5 29 5 75 25 N Leisure hours per week H Work hours per week Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 11a Labor Supply Curve That Slopes Upward and Then Bends Backward a Labor Leisure Choice Y Goods per day L 3 Time constraint I3 I2 I1 L2 e3 e2 L1 24 e1 H2 H 3 H1 0 H Work hours per day Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 11b Labor Supply Curve That Slopes Upward and Then Bends Backward b Supply Curve of Labor w Wage per hour Supply curve of labor E3 E2 E1 0 H1 H 3 H2 24 H Work hours per day Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved Figure 5 12 Relationship of Tax Revenue to Tax Rates Tax revenue 800 600 400 Tax revenue 200 0 50 100 79 Marginal tax rate Jeffrey M Perloff Microeconomics 2001 Addison Wesley Longman Inc All Rights Reserved
View Full Document
Unlocking...