The document discusses the economic concept of demand. It defines the law of demand and explains the substitution and income effects that influence demand. It then discusses how individual consumer demand relates to market demand and how firm demand depends on market structure. Finally, it covers elasticity concepts including price elasticity of demand and its determinants.

5. Individual Consumer’s Demand Qd X = f(P X , I, P Y , T) quantity demanded of commodity X by an individual per time period price per unit of commodity X consumer’s income price of related (substitute or complementary) commodity tastes of the consumer Qd X = P X = I = P Y = T =

6. Qd X = f(P X , I, P Y , T)  Qd X /  P X < 0  Qd X /  I > 0 if a good is normal  Qd X /  I < 0 if a good is inferior  Qd X /  P Y > 0 if X and Y are substitutes  Qd X /  P Y < 0 if X and Y are complements

10. Market Demand Function QD X = f(P X , N, I, P Y , T) quantity demanded of commodity X price per unit of commodity X number of consumers on the market consumer income price of related (substitute or complementary) commodity consumer tastes QD X = P X = N = I = P Y = T =

13. Linear Demand Function Q X = a 0 + a 1 P X + a 2 N + a 3 I + a 4 P Y + a 5 T P X Q X Intercept: a 0 + a 2 N + a 3 I + a 4 P Y + a 5 T Slope:  Q X /  P X = a 1

14. Linear Demand Function Example Part 1 Demand Function for Good X Q X = 160 - 10P X + 2N + 0.5I + 2P Y + T Demand Curve for Good X Given N = 58, I = 36, P Y = 12, T = 112 Q = 430 - 10P

15. Linear Demand Function Example Part 2 Inverse Demand Curve P = 43 – 0.1Q Total and Marginal Revenue Functions TR = 43Q – 0.1Q 2 MR = 43 – 0.2Q

19. Price Elasticity of Demand Linear Function Point Definition

20. Price Elasticity of Demand Arc Definition

21. Marginal Revenue and Price Elasticity of Demand

22. Marginal Revenue and Price Elasticity of Demand P X Q X MR X

23. Marginal Revenue, Total Revenue, and Price Elasticity TR Q X MR<0 MR>0 MR=0

26. Income Elasticity of Demand Linear Function Point Definition

27. Income Elasticity of Demand Arc Definition Normal Good Inferior Good

28. Cross-Price Elasticity of Demand Linear Function Point Definition

29. Cross-Price Elasticity of Demand Arc Definition Substitutes Complements

33. Chapter 3 Appendix

37. Indifference Curves: Complements and Substitutes Perfect Complements Perfect Substitutes Q Y Q X Q Y Q X

39. Budget Lines: Change in Price GF: M = $6, P X = P Y = $1 GF’: P X = $2 GF’’: P X = $0.67

41. Budget Lines: Change in Income GF: M = $6, P X = P Y = $1 GF’: M = $3, P X = P Y = $1