Deriving Demand Curves

Session Overview
Individuals make decisions about what to buy and when. But when we talk about the economy every day, we are often analyzing what millions of people are doing and deciding to do at different times. In order to think about this problem, we need to move from the micro to the macro and use our model of individual behavior to generate predictions about what will happen to total demand when the price changes. Vintage food stamps. Image courtesy of Brian on Flickr. Keywords: Constrained budget; price elasticity; Engel curves; income effect; substitution effect.

Session Activities
Readings Read the recitation notes, which cover new content that adds to and supplements the material covered in lecture.

Recitation: Substitution (PDF)

Before watching the lecture video, read the course textbook for an introduction to the material covered in this session:

[R&T] Chapter 7, "The Analysis of Consumer Choice." Section 7.2.3. [Perloff] Chapter 5, "Applying Consumer Theory." (optional)

Lecture Videos View Full Video

Lecture 6: Deriving Demand Curves (00:47:22) Transcript (PDF)

View by Chapter

Application of Budget Constraints: Food Stamps (00:15:36) Drawing Demand Curves (00:07:47) Drawing Engel Curves (00:03:07) The Income Elasticity of Demand (00:06:33) Substitution and Income Effects (00:14:16)

Resources

Graphs and Figures (PDF)

Further Study
These optional resources are provided for students that wish to explore this topic more fully. Textbook Study Materials See the [Perloff] companion website for an overview of the main topics covered in the chapter, as well as quizzes, applications, and other related resources.

Chapter 5