PRICE OFFER CURVE ort Price Comsumption | cussve | The compmations of & m™ poimts fer a \ consumer where Pstice ef Commodity bes peice of ote commodity. amc &mcome consume. nemaining constant , xk, * i} Psutce Off Eee cusve when & CO™mMM ody, hat imekastic demand with sespect to tts Puce | et enange ir qe demomdet <7 & ir Psxice.| O wrth gail im Psuce of Mo and upwostch slob P.O-c Shows that demond siises fort bath | Komd Ye ® Price of Y hos semained btonstant, Hrs means that an merease [M demand gor! | OY of Consumer has mot chan ged which | Y with imotease botae expenditure ony J implies that if Te on ¥ Nas tea, then TE Scanned with CamScanner = :Totat Expenditure method ef BPE AS ULE elasticity of do $f Putce and totat exp. move tn same distection re FB totar exp. ca CONSUMER PNCHEASes WIth PndLease im pruce aNd Aeurcases WIth deaiease fr Prtce, then tc nepHesents Mmetastic dd. ag Potce changes and TE Kemains constant then aa ts Unttasy elastic e q* ra" lo 10 metas ok 4 6 ~ lh . loo untang elastic a We Be BEELELERSSIFSGIOSGCTITSGESGT TCS SSCSEEEECCCCCE ‘ Scanned with CamScannerOM K must decrease to Satinfy Mmeome Comsts.arnt . Te Is, @~ with gau ™ pouece of Ks TE om x falls whrcn scepsce sents Prmetastc demand WT df Poe rs clownwased sloping then demand fox comme, whose price has changed ts efastic. (When Pr falls, downward sloping 2.06 shows) that demand of X tes but demand fore Y des Wt) fsttce ef Y 18 constant, TE on ¥ ¥ Gi) Y of consumer is constant, 1. TE onx must INEtease. which sxepxesents elastic dc TH 46 Pe changes and POC s vf a astnotght gime then It ymeans demand for X fs unttasuy ebastic- G)WHH fall im Pe, dd fos xT but demary fox VY nematns constant Gi) Py is constant, Te om Y is constart | Scanned with CamScannerGi) Gruen Tncome of consumest is constant Te on % Ts constamt which sep HESETILS onrtasy etastictty of demand BeDETINGUISHING THE IMPACT OF CHANGE IN PRICE ON QUANTITY DEMANDED, Mrto Gacome effect and substitution eppect? \ PRICE EFFECT? Change tm 4b demanded due TYNE | Em to change IM peice of commodtt y + fos | re ; | wen df price ef comm. falls and yb demand, ed Ireseases due bo It, tt fs price ebhece INCOME EFFECT ¢ Change Im demand due to chonse tm pice agpecting pustenosing | power on steal tmneome of the comsume. | fost & 4 1B Paice Patls ythen pustehastng powese of, Individual frcmeases. Ie neal ¥ | meneases and tt Will eset (r. MGLCALE Ind demand for maxnmat goo: Su BSTITOTION Eee CTs Grange tm dd due to SvuesTITOTION verecececcerrnttiin chonge im nelative price eR X com paxeck Scanned with CamScannerMelatcvely cheaper than Yand mere will be | toy. fon €g If Px galls, hen rt becomes & << = More demand Zor As INS Mepsesents Subst | ~tion efbect There aste 2 methods to atsting wish bi Imcome efpect and SUbstrtutron efpect @M Method of HIcKs: Ace to Hicks ff money Imcome fs changed apie, change ™m ae such +nat puss hacia. Power of tndtu rduall | con be kept constant, tn terms of ortigirat | yttetey at new price xatio +hen the 4 | Im demand witt be due to Substtturciory “gp sOniginat BL AB, with Income 4,5 Price ef A> Pa woe Yo Py | +96 Px falls to Pao | then 24 shifts to B.L AB! Scanned with CamScannerei OCCT SSSR OUP REPRE RPE PEOREEeaa +The rua budget tine Ts AB CH, Px, Pyd } Tmrittat eq™ ts at e,, where X= ki, | + Pouce of X polls to Rv and BL motates to | AB’. New ey™ ts at @2 ands. dd por K | Lats suises to YQ = Xi Ka > _LPorice ep pect : If monty imeome 4 commumes fs weduced ko make Ais oreat Income ox purrchas img toxms of ' MM pre ' i Comstant fr veiUty ot Neus Prurce, natto then comMeENSATED BL cd Is dxaun Which has same slope- 0s AB! and rt ts tanger to Ic, at & | o X Ka IS SUbSteUALON eppet because with the compensatect decxease Mm MONEY Imeome, hasing power ume CD has same puree budget as ontginat budget Bene AB, but MOHL * Is consumed aue bo X beng wedacivety cheaper thon Y. © Kyha represents Imcome egpect because when BL. ShIfES from CD to Ap, t @ &@ Scanned with CamScannerNebsesents imerease In consumption due to noreage tn, puxchasing powell ab new pstice swactto +P fart rn price of K makes x secatively cheapes.,tt stesutts in meseasing demancl ox due to substtution eppect Price and yy demanded due to sub. efhect ane Iruessety swHetated to each other. Bey Gla that $6 is Neg ative (sAnsry) “A fret tn Puce of X54 ncseeases pusxchas mg powes om veal tricome of the Consumese fio pe todt due to Which demand tresieas ts HOM KM) | as Xfs Noxmat Good. te there extsts an| Imverse setartion between Prtice of x arti demand, change due to Puxchasing power. | Tegative (meome fect Im case ob MOXMNAL Goods, both Te This TS cattecd and &€ ane neq ative anol neinfosce each. other Scanned with CamScanner QD—AAAAAAAALAL 4 LL DD 4 @ 4 C2 @ 4 4 C4 2 4 2 @ © © © © 6 ©x brelabive pow eed pouser) WEE amd Income Effect Mm case ef Ingoroxt goods: fa) which ase Not ‘BEEN ~ J me 6b)” " gifben Imgeioe goods axe ate those goods whose One clemamad fotts os Trcome becomes T™ and demand stises Ob imcome gore In case of, pice change in mpeoorx qo" ree dinection se but Tot gibbe™ Tek and $.& move NX oppos o foutce faee pose X 7 ingerio i rt 9h oO commodity is tnperto buts Ne q'bbe™ fe meanss negative gb due Putce onanges dominote> postive tmeome efpect due to pce chonge: STU eee ad dd Scanned with CamScanner