week 6-10

Question 1

What is the endowment income effect?

Answer 1

change in income when price changes x change in demand when income changes

Question 2

what does the size of total effect depend on?

Answer 2

the sign of e1-X1

Question 3

What is a net demander/supplier

Answer 3

X1>e1 = net demander

vice versa

Question 4

Equation for endowment income effect

Answer 4

change in X1^m/change in income x change in income/change in P1 = change in X1^m/change in income x e1

Question 5

What is income effect

Answer 5

change in the demand for good 1 when we change income but holding price fixed

Question 6

What is substitution effect

Answer 6

sometimes called change in compensated demand, consumer being compensated for a price rise by having enough income give back to him to purchase the original bundle