a

1. Price, Income, and Consumption Analysis

7. The Budget Line 0 1 2 3 4 5 6 7 8 9 10 2 4 6 8 10 Cakes (per week) Softies (per week) Unaffordable Affordable Income Rs.30 Cakes Rs.6 Softies Rs.3 a b c d e f

11. Changes in Prices and Income 0 1 2 3 4 5 6 7 8 9 10 Softies ( per week) 2 4 6 8 10 Cakes (per week) Price of a Cake is... A Change in Price a f … Rs.6 … Rs.12 … Rs.3

12. Changes in Prices and Income 0 1 2 3 4 5 6 7 8 9 10 Softies (per week) 2 4 6 8 10 Cakes (per week) A Change in Income a f Income Rs.30 Income Rs.15

14. A Preference Map 0 2 4 6 8 10 Softies (per week) 2 4 6 8 10 Cakes (per week) g c An indifference curve Preferred Not preferred

16. A Preference Map I 1 0 2 4 6 8 10 Softies (per week) 2 4 6 8 10 Cakes (per week) g c j I 2 I 0

20. Marginal Rate of Substitution 0 2 4 6 8 10 Softies (per week) 2 4 6 8 10 Cakes (per week) I 1 c g MRS = 2 MRS = 1/2

23. Degree of Substitutability 0 2 4 6 8 10 Softies (cans) 2 4 6 8 10 Cakes Ordinary goods

24. Degree of Substitutability 0 2 4 6 8 10 Marker pens at the local supermarket 2 4 6 8 10 Perfect substitutes Marker pens at the campus bookstore

25. Degree of Substitutability 0 1 2 3 4 5 Left running shoes 1 2 3 4 5 Perfect complements Right running shoes

27. The Best Affordable Point 0 2 4 6 8 10 Softies (per week) 2 4 6 8 10 Cakes (per week) h f 1 i I 1 Best affordable point I 2 I 0 c

31. Price Effect and Demand Curve 0 2 4 6 8 10 Softies (per week) 2 4 6 8 10 Cakes (per week) I 1 I 2 5 5 Best affordable point: Cakes Rs.6 c Best affordable point: Cakes Rs.3 j

32. Price Effect and Demand Curve 0 2 4 6 8 10 1 2 3 4 5 Cakes (per week) 6 Mr. MBA’s demand curve for Cakes a b Price (Rs. per Cake) 5

35. Income Effect and Change in Demand 0 2 4 6 8 10 Softies (per week) 2 4 6 8 10 Cakes (per week) 3 I 2 I 1 Income Rs.30 Income Rs.21 j

36. Income Effect and Change in Demand 0 2 4 6 8 10 Price (Rs. per Cake) 1 2 3 4 5 Cakes (per week) 6 D 0 b D 1 c

39. Substitution Effect and Income Effect 0 2 4 6 8 10 Softies (per week) 2 4 6 8 10 Cakes (per week) I 1 I 2 Price Effect 5 5 c j Income Rs.30 Cakes Rs.3 Income Rs.30 Cakes Rs.6

40. Substitution Effect and Income Effect 0 2 4 6 8 10 Softies (per week) 2 4 6 8 10 Cakes (per week) I 1 I 2 5 5 3 7 Substitution effect and price effect c j k Income effect Substitution effect Substitution effect

44. The Supply of Labour Leisure (hours per week) 100 168 Income (Rs. per week) 0 350 I 1 133 138 148 100 450 Z Time allocation decision Rs.5 Rs.10 I 0 a I 2 I 1 Rs.15 b c

45. The Supply of Labour Labour (hour per week) Wage rate (Rs. per hour) 0 20 30 35 5 10 15 LS a b c

49. The End